Ascend Communications will acquire fault-tolerant computer maker Stratus Computer for $822 million, the companies announced this morning.
With the addition of Stratus' Signaling System 7 (SS7) switches and other high-end technologies, Ascend will be able to offer services that integrate voice and data networks.
Ascend will combine Stratus' SS7 switches, OSS software and fault-tolerant platform with its own carrier offerings, said Mory Ejabat, president and CEO of Ascend, in a statement. He said the acquisition would also allow for the integration of voice, fax and data traffic networks through multiservice ATM switches.
Ejabat said the combination would let Ascend customers offer services such as fax and voice over IP.
"The rapid growth of the Internet has increased data traffic and strained the PSTN, forcing carriers to constantly expand their telecom backbones," he said.
Ascend itself has been in the middle of the rumor mill. Word has been circulating that it is a possible target for a Lucent acquisition. "The combination strengthens our relationship with our existing partners such as NEC and Lucent," Ejabat said.
Ascend said it would absorb Stratus' telecom units such as its telecom carrier unit and spin-off its non-telecom parts, such as its financial and enterprise software group, as subsidiaries.
Reports had been circulating since the middle of last week that a deal was in the offing between the two companies, leading to fluctuations in their respective stock prices. Stratus shares rose, while Ascend's fell. At the market's close on Friday, Stratus shares were up by 31% to $28.9 while Ascend's were down 15% to $44.5.
Under the agreement, each share of Stratus stock will be exchanged for 75% of an Ascend share. The Stratus board of directors gave initial approval for the acquisition late last week, and the Ascend board approved the buyout last night.
Both companies reported their second quarter results for fiscal 1998 last month. Ascend reported net income of $59.1 million for the period ending June 30, 1998, up 12.8% on the previous quarter, with net sales of $327.4 million, a rise of 7.3% on Q1 fiscal 1998. Meanwhile, Stratus announced a loss of $10 million for its second quarter of fiscal 1998, with revenues down to $134.3 million from $167.6 million in the same quarter a year ago.
Ejabat will remain president and CEO and Stratus CEO Bruce Sachs will become executive vice president of and general manager of the Carrier Signaling and Management Business Unit, according to Ascend. Ascend's telecom business largely consists of the fruits of its $3.7 billion acquisition last year of networking company Cascade Communications. The Cascade purchase was just one of eight within the past two years for Ascend.
Haney is a correspondent for the IDG News Service.
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