board of directors are meeting today, according to published reports, to discuss a bid from
that could be worth between $17 to $20 billion.
Yesterday Ascend's market value jumped 7% to $16.5 billion on the report of a possible deal although its share price is trading in a narrow range today. Although Ascend executives in the past few months had indicated that they preferred to stay independent, many analysts think the Lucent deal is win-win for both parties.
"Ascend is the incumbent in numerous accounts that Lucent needs to win," says Tom Nolle, president of
consulting firm. Nolle's firm has performed consulting work for Ascend and Lucent. But Lucent would purchase Ascend's proven business rather than developing the technology in-house in order to get on Internet time and thwart leading networker
So why should Lucent, the largest maker of telecommunications equipment, with $30 billion in revenue, be interested in the $1-billion-revenue Ascend? The answer: technology. Here's a look at the Ascend's jewels:
ATM and frame relay switches
Large carrier networks look to Ascend to build data switches. According to industry analysts
, in the third quarter Ascend sold $106.2 million of the edge switches that operate by asynchronous transfer mode, or ATM, compared with $22.1 million for Cisco's comparative units. ATM plays a pivotal role in future networks. Carriers such as
have deployed Ascend's ATM and closely related "frame relay" systems both to ease traffic bottlenecks in the data-based portions of their networks. The aim is to run voice, video and data signals concurrently in the near future. In addition to its own ATM offerings, Cisco has proposed an alternative strategy -- Internet routers that have ATM-like features. But Nolle says that for now Ascend holds the lead. Switches are simpler and faster while routers take more time to choose signal paths.
Remote Access products
Ascend also thrives selling remote access technology that Internet service providers use to connect customers to the Internet. In the third quarter Ascend reported $175 million in sales from remote access products, edging Cisco and
, according to Dell'Oro. Ascend has combined its remote access products with telephone-based technology from its
division, acquired in October, in order to help carriers relieve the stress of Internet messages on conventional voice architecture.
Less noticed is Ascend's rich Navis software. By using it, personnel at large phone companies are able to keep close tabs on their network infrastructures as they fill customer orders and set delivery dates for new services.
The difference Navis makes is "like night and day," says Craig Johnson, principal of the
consulting firm. Ascend has the edge over Cisco's software, he says. Navis' "open architecture" will help Lucent operate disparate network systems jointly.
If the reports hold water, Lucent will buy "the best product set that exists in the market," says Nolle. "They're also buying an incumbent installed position with the biggest buyers in the market. It just doesn't get any better than that."