Lucent buys Ascend in 20 bn deal

The transaction is expected to be completed during Lucent8217;s third fiscal quarter, which ends June 30, 1999, and will be accounted for as a pooling of interests.

The deal would be the largest merger yet as the markets for voice and data networks continue to blur. While Lucent, which has traditionally provided voice products for telecommunications companies, has made some small acquisitions to enter the data networking market, an acquisition of Ascend would put it in a position to challenge networking leader Cisco Systems Inc, Ascend8217;s chief rival.

Through the deal Lucent will gain access to Ascend8217;s sophisticated data networking technology, while Lucent8217;s greater Financial resources and large sales force will put more muscle behind Ascend8217;s products, analysts said. Lucent and Ascend, long rumoured as merger partners, have been in talks for months, industry sources said.

An acquisition of Ascend would follow Lucent8217;s announcement on Monday that it agreed to buy closely held Kenan Systems Corp, a billing software company, for 1.4 billion. Lucent has made a small series of acquisitions since it was spun off from ATamp;T Corp in 1996, but it has been widely expected to make a massive acquisition since October, when it was freed from a 2-year restriction that prevented it from pursuing acquisitions using so-called pooling-of-interest accounting.

Acquisitions made using pooling-of-interest accounting allow companies to avoid certain charges that would hurt profits over a long period. quot;This is a strong move for Lucent, they need to build their product portfolio and attack the data market. Ascend needed to align itself with one of the major deep pocket players,quot; said one industry analyst who declined to be named. Even with an acquisition of Ascend, Lucent will still have areas of weakness in serving international markets and providing networking equipment.