Lucent to go deeper into carrier market with Ascend buyout
(IDG) -- Lucent Technologies is about to get the entree it needs into the networks of new carriers and Internet service providers.
The company has announced it will merge with Ascend Communications in a $20 billion deal that will fill some gaps in its product line and bring it customers outside the traditional voice carriers.
With competitive service providers trending toward data-switch backbones, Murray Hill, N.J.-based Lucent had to acquire a stronger data product line and a stable of customers among new providers, according to Matt Barzowskas, vice president of First Albany Corp., an investment firm in Boston.
Ascend provides both. With its core ATM switches, hybrid frame relay-ATM switches, and access concentrators, Ascend has found its way into the networks of major Internet service providers, data service providers and regional Bell operating companies.
"Lucent just had a really big hole in its product line," says Liza Hendersen, director of consulting for TeleChoice, a Boston-based consultancy. "Its (Globeview 2000 switch) was simply too big for carriers to deploy."
Ascend's big thrust over the past year has been its Multivoice initiative that supports IP voice over its frame relay and ATM switches.
With the introduction last year of its SS7 Gateway, Ascend has paved the way for networks based on Ascend data gear to interoperate with the traditional voice switches that have been Lucent's mainstay. The SS7 Gateway translates back and forth between the signaling system for voice circuit switches and frame relay and ATM addressing.
Ascend also brings key service-provisioning capabilities with its Navis management software.
Combined with Lucent's strong dense wave division multiplexing technology, the merger gives Lucent an imposing collection of high-speed backbone technology, says John Morency, vice president of network solutions for Renaissance Worldwide in Newton, Mass.
Ascend's Professional Services group also brings network integration, operations, engineering and marketing skills to carrier customers and is stronger than the similar group within Lucent, Hendersen says.
The deal puts Lucent on better footing to compete against the two other major networking giants, Nortel and Cisco. Lucent's deal with Ascend mirrors last year's purchase of Bay Networks by Nortel, which gave Nortel needed data networking expertise and customers to add to its voice-carrier portfolio.
Cisco lacks pure voice switching but that technology is not necessary, Barzowskas says. Most new purchases by carriers will be of data gear, which Cisco already offers. Cisco's challenge is to expand further into carrier networks, he says.
Lucent will have to integrate its product lines and solve technical problems such as developing a common management platform, Morency says. Ascend's MAX TNT access concentrators overlap with Lucent's Portmaster line and one will have to be weeded out, he says.
Lucent now faces the challenge of merging the two companies. Ascend is based in Alameda, Calif., so Lucent will have to deal with a bicoastal merge.
That period of integration will open a window for competitors to make inroads because mergers unavoidably absorb the attention of top management, Barzowskas says.
Lucent paid premium price for Ascend, according to Barzowskas. The $20 billion stock swap is about 18% higher than Ascend's market capitalization. The deal is expected to close about mid-1999.
Tim Greene is a senior editor at Network World.
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