Lucent completes acquisition of Ascend

Ascend Communications shareholders yesterday approved the $US24 bilion merger between Lucent and Ascend, with more than 99 per cent of votes in favour of the merger.

Each outstanding share of Ascend common stock will be converted into 1.65 Lucent shares.

Ascend will become part of Lucent's new Internetworking Systems unit, which will focus on delivery of broadband networks.

Lucent Technologies said it hopes its merger with Ascend Communications will make Lucent the top provider of networking gear for a new generation of data networks, and help it to grow its share of the networking market worldwide.

"With this merger, Lucent now has the broadest, most powerful and reliable data networks products in the industry," Rich McGinn, Lucent's chairman and chief executive officer, said at a briefing with press and analysts yesterday.

Lucent built its reputation providing switches, routers and other complex equipment that underlies voice networks. With the current explosion in Internet use, the company is seeking to reposition itself as a business that can serve both voice and data networking markets.

More than a way to acquire products or technologies, the acquisition of Ascend is about securing skilled workers for Lucent in an industry where there is a "war for talent", McGinn said.

The deal adds about 1000 names to Lucent's payroll, bringing its workforce in the Silicon Valley area to about 4000, McGinn said. Lucent has 18,000 staff at its New Jersey headquarters, and another 30,000 workers outside the US.

McGinn dismissed published reports that Lucent plans to lay off 10 per cent of the employees in the merged company as "rubbish", and said he isn't planning any layoffs at all.

The merger with Ascend, valued at about $US250 billion based on Lucent's current stock price, is part of a broader acquisition strategy: Lucent announced on Friday that it will buy startup Nexabit Networks for about $900 million. Nexabit makes a router/switching technology for IP networks designed to move terabytes of data over a wide area network.

Lucent hopes the acquisitions will help it capture a larger share of the world's networking market, which stands today at about 7 per cent.

"We believe we can grow that by a few percentage points a year," with the biggest growth coming from Europe, East Africa, Latin America and Asia, McGinn said. Lucent expects about 1000 new wireless, Internet and other service providers to emerge in the world this year, he added.

One analyst said that only through the acquisition of a company like Ascend could Lucent make significant inroads in the Internet service provider market.

"If you try to grow organically, it takes too much time. To get into the ISP market you need to pick up those large chunks" of business, said Michael Howard, principal analyst with Infonetics Research.

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