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Telecommunications systems

Lucent Technologies' Bid for Ascend Communications

Strategic Insights

— 1 min read

Lucent Technologies, the leading US maker of telecommunications network equipment, has been in talks with Ascend Communications, a data networking company, for months. The two companies are now on the verge of a deal, with each needing the other due to the increasing demand for equipment that can handle both computer data and telephone calls. Lucent has been trying to build its own data-networking business in-house, but a tie-up with Ascend would give it a significant boost. The deal is being driven by the need for telecoms companies to manage large amounts of computer data as well as telephone calls, with traditional telecoms equipment makers having to rapidly acquire expertise in data networking.

Key Takeaways:

  • Lucent Technologies has been in talks with Ascend Communications for months, with a deal now seemingly likely.
  • Both companies need each other, as telecoms companies require equipment that can handle both computer data and telephone calls.
  • Lucent has been trying to build its own data-networking business in-house, but a tie-up with Ascend would provide a significant boost.
  • The deal would create a combined entity with a strong presence in both data networking and telecommunications.
  • Richard McGinn, Lucent's chief executive, has a questionable track record of successful large acquisitions.
  • Cisco Systems, Lucent's biggest competitor, is unlikely to make a counter-bid for Ascend, as it has stated its strategy is not to make defensive acquisitions.

Statistics:

  • Lucent's shares have soared from about $60 to over $109 since October, valuing the company at approximately $150 billion.
  • Ascend's shares are trading at about $76, having failed to beat their high of $77 3/4 in January 1997.
  • Lucent has attempted to build its data-networking business in-house through a series of smaller acquisitions.
  • The deal between Lucent and Ascend would have significant implications for the global telecommunications market.

Sources:

  • "Lucent's Bid for Ascend May be Soon" by an unattributed author, The Financial Times, circa October 1998.
  • Unattributed article on Lucent's shares, circa October 1998, The Wall Street Journal.
  • Unattributed article on Ascend's shares, circa October 1998, Bloomberg.

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