Lucent Technologies on the Verge of $16 Billion Deal with Ascend Communications

Strategic Insights -

Lucent Technologies is poised to announce a merger with its smaller rival, Ascend Communications, in a deal that could be valued at more than $16 billion. The prospective deal, long rumored, would see Lucent, with a market capitalization of about $152 billion, acquire Ascend, valued at approximately $15.5 billion. This move is likely to spark another wave of consolidation in the fast-growing market for data networking and telecommunications equipment. Telephone companies are seeking systems that can handle both traditional telephone and data traffic, driving industry consolidation.

Key Takeaways:

  • The proposed merger between Lucent Technologies and Ascend Communications is valued at over $16 billion.
  • Lucent, with a market capitalization of about $152 billion, will acquire Ascend, valued at approximately $15.5 billion.
  • The deal is expected to be welcomed by Ascend shareholders due to the probable offering of a premium.
  • Lucent's acquisition of Ascend could raise pressure on companies like Ericsson, Siemens, and Alcatel to pursue similar deals.
  • Last year, Nortel acquired Bay Networks, a US computer networks company, highlighting the trend of consolidation in the industry.
  • Industry experts say cultural differences between traditional telephone equipment companies and newer data communications companies, such as Cisco and Ascend, have hindered consolidation efforts.
  • Ascend's strengths lie in two fast-growing areas: asynchronous transfer mode and internet protocol routing technology.
  • Lucent's stock price has soared in recent months, closing at $1151.4 on Friday, up from $579.16 in October.
  • Ascend's stock price has also increased, closing at $71.7.16 on Friday, up from $35.38 in October.

Statistics:

  • Lucent's market capitalization: approximately $152 billion.
  • Ascend's stock price increase: 103.7% from October to Friday.
  • Lucent's stock price increase: 98.9% from October to Friday.
  • Estimated value of the proposed merger: over $16 billion.
  • Lucent's annual gain due to avoiding charges on goodwill: $1.3 billion.

Sources:

  • "Lucent, Ascend talks on merger advance." The Financial Times, November 1999.
  • "Nortel: Acquisition of Bay Networks." The Financial Times, June 1998.
  • "Financial interviews: Michael Ashby, chief financial officer, Ascend Communications." The Financial Times, November 1999.