Lucent Technologies May Pay $16 Billion for Ascend Communications

Strategic Insights -

Lucent Technologies, a pioneering telephone equipment producer spun off by AT&T, is reportedly considering a massive deal to acquire Ascend Communications, a major supplier of Internet and computer networking gear. The potential acquisition could value Ascend at over $80 a share and spark increased competition in the lucrative market of telecommunications equipment. Analysts believe that a Lucent-Ascend deal would speed up product development and potentially reshape the industry's competitive landscape.

Key Takeaways:

  • Lucent Technologies may pay as much as $16 billion in stock to acquire Ascend Communications, valuing the company at over $80 a share.
  • Ascend's stock has tripled in the past year, rising by over 7 percent to $76.68 3/4 in Nasdaq trading.
  • Lucent's shares fell by 2 percent to $112.93 3/4 on the New York Stock Exchange.
  • The potential acquisition would give Lucent a significant boost in the field of data networking equipment, allowing it to fill gaps in its product portfolio.
  • Analysts believe that a Lucent-Ascend deal would speed up product development and foster competition with Cisco Systems, the dominant player in the industry.
  • Steven Koffler, a data networking analyst at Donaldson Lufkin & Jenrette Securities, noted that Ascend has "really good positioning in emerging growth areas of telecom equipment."
  • Christin Armacost, an industry analyst at Everen Securities, said that a merger would allow Lucent to catch up with Cisco in the rapidly changing telecommunications equipment market.

Statistics:

  • Lucent's shares fell by 2 percent to $112.93 3/4 on the New York Stock Exchange.
  • Ascend's stock has tripled in the past year, rising by over 7 percent to $76.68 3/4 in Nasdaq trading.
  • Ascend's market value may reach over $4 billion if the deal is valued at $80 a share.
  • Cisco Systems has supplied about three-quarters of the nuts and bolts used to build the Internet.
  • Lucent Technologies has spun off Kenan Systems Corp. for $1.5 billion in stock.

Sources:

  • "Lucent to Buy Kenan Systems for $1.5 Billion," USA Today, [undated]
  • "Lucent Tech Said to Consider Ascend Merger," Financial Times of London, March [undated]
  • "Cisco Previews Next-Generation Routers, Switches," CNET News, [undated]