Since Oct. 1 — the day the U.S. government lifted restrictions on Lucent Technologies Inc.’s ability to use pooling-of-interest accounting to make large acquisitions — the industry has waited in anticipation of The Big Buy.
With its hands no longer tied by regulatory constraints, which stemmed from its October 1995 spin-off from AT&T Corp., Lucent was free to scout the industry for that one company that could transform it from being merely a leading telecom equipment provider to being a key player in the emerging, and much larger, voice/data convergence market.
On Jan. 13, Lucent announced the biggest acquisition in the history of the networking industry — the US$20-billion purchase of Ascend Communications Corp. of Alameda, Calif., a deal worth more than twice as much as Northern Telecom Ltd. paid for Bay Networks Inc. last year.
Lucent had acquired in recent months a number of small, but significant, data networking players, but the Ascend purchase solidifies its position as one of the top (if not the top) competitors in the network convergence space, along with Nortel Networks and Cisco Systems Inc.
Ascend may not be a household word in networking shops across Canada, but its portfolio of WAN core switching and data networking equipment for telcos, ISPs and enterprises is considered proven technology in the United States and the Asia-Pacific region.
In the remote access concentrator market, for example, Ascend is the number two player worldwide behind 3Com Corp., according to market research firm Dataquest Inc. Dataquest figures for 1997 show 3Com had a 37.7-per-cent share of the concentrator market, while Ascend held 32.3-per-cent market share.
What Ascend brings Lucent, which Lucent didn’t get from its other data networking acquistions, is a large amount of cachet with telecom service providers — many of whom already trust Lucent with their voice networks.
And although most end-user corporations will not be direct customers of the combined Lucent/Ascend equipment portfolio, they will undoubtedly purchase services from carriers who run their networks on the two companies’ gear.
In fact, some industry experts predict the merger between Lucent and Ascend may accelerate the adoption of converged voice/data equipment in worldwide telco infrastructures. With two proven vendors getting closer to offering complete voice/data solutions, telcos will be able to move more aggressively on their plans to add data capability to their voice networks, experts say.
This is a necessary step before the promise of network convergence can be fully realized by corporate customers themselves. Still, corporations are going to have to prepare their networks to take advantage of this trend.
So start your engines.