The main reason for Lucent Technologies’s recent acquisition of Ascend Communications was to gain mindshare and market share in the carrier space, one analyst said.
Bob Hafner, vice-president and research director at Gartner Group Canada in Mississauga, Ont., said Ascend’s technology itself wasn’t the main draw — the product sets of the two companies actually have quite a bit of overlap, particularly in the ATM space.
“But Ascend’s product set was, in the ATM and frame relay space, very well respected and very successful, and clearly that’s what Lucent bought them for,” Hafner said.
He said Lucent has been making a lot of smaller acquisitions over the past couple of years, including Livingston Enterprises, Prominet, Agile Networks Inc. and Yurie Systems Inc. — all companies with good products but no real mindshare or market share. The big difference with the Ascend merger — a $20 billion deal announced mid-January and expected to be official by the end of June — is the Ascend name and reputation alone will help Lucent in the service provider and data space, a space Lucent has been trying to make headway in.
Analyst Christin Flynn of The Yankee Group in Boston agreed. She said Lucent has been very candid about its strategy to become an end-to-end service provider of voice and data for the carrier market.
“I think Ascend has made quite an impression on the emerging carriers,” she said. “So by buying Ascend, Lucent is not only buying the products, but it’s buying the customer base as well.”
Hafner added that forming these new relationships with carriers was crucial for the future.
“That gives them a relationship with the datacom group, which is obviously very important when you think of how networks are evolving. It’s no longer going to be a voice network and a data network, it’s going to be voice on a data network.”
While Hafner said for the most part the merger wasn’t about specific products, Flynn did name a few she thought Lucent would definitely benefit from.
“The GX550 ATM is a crucial product for Lucent — Lucent’s been OEMing that piece of equipment in place of its old GlobeView-2000. The sales on the GlobeView-2000 have been flat for the past couple of years, and the GX550 has really taken a chunk out of Lucent’s market share in the carrier core space,” she said.
“Also, the Max TNT access concentrator is going to be a key product.”
Rich McGinn, chairman and CEO of Lucent, said he felt this was clearly the perfect time to merge with Ascend.
“Service providers around the world are building and deploying multiservice networks to deliver their customers the data, voice, fax and video capabilities they demand and need today, in their personal lives as well as their professional lives,” he said. “Over the next two years, 1,000 new service providers will also enter the market place worldwide, so the opportunities for Lucent continue to grow.”
He added: “Together, we propose to be the architects and the builders of a new generation of broadband networks.”
As for Ascend, this merger was a positive move, according to Yankee Group’s Flynn.
“Ascend has a very strong product set for the needs of carriers today, but in five years they may have found themselves kind of isolated, or they would have possibly found themselves being a niche provider,” she said.
“So they’re really gaining the strength and the scale of Lucent in their corporation and they’re gaining Bell Labs, which is quite a substantial research house, to put it mildly.”
The same week the Ascend merger was announced, Lucent also acquired Kenan Systems Corp.,
a maker of third-party billing and customer care software.