Upping the ante in the race to provide technology for a converged networking future, data player Ascend Communications has looked to a veteran provider of high-end server computers for help.
Yesterday's announcement that Ascend would purchase Stratus Computer for about $820 million in stock is the latest signal that traditional data networking companies will cast a wide net in order to nab the appropriate technologies for next-generation network upgrades.
The deal feeds into the notion that separate data and voice networks will eventually merge into one pipe that will provide the capacity to route voice and data-based digital communications.
What attraction did Stratus hold for Ascend? The Marlboro, Massachusetts-based systems firm has carved out a niche by providing computers that offer maximum uptime. The company boasts that the majority of the 30 biggest telecommunications firms in the world use its hardware and software, among them AT&T's 800 service, a recent market that has developed into the firm's largest revenue chunk, according to executives.
"Once you peel the onion back, it makes a lot of sense," said Ken Fehrnstrom, senior vice president of business development for Ascend, of the acquisition.
Stratus has developed software based on Signaling System 7 that essentially provides opportunities for various value-added services that telecommunications companies increasingly rely on to boost profits by directing traffic for voice calls.
That same premise can be used to redirect Net-based communications from voice-based networks to data pipes. Providing this technology as a means to blend voice and data is thought to be one step on the road toward a converged network nirvana, a connected Holy Grail that continues to drive the current merger binge within the networking industry.
"This really takes these networking companies like Ascend and Cisco to a whole new level in the telecommunications business that they really don't know squat about," noted Ray Keneipp, an analyst with market watcher Current Analysis.
Veterans in this field include telecommunications equipment giants such as Lucent Technologies and Nortel.
Stratus, one of several high-end systems companies that litter the landscape surrounding the Boston, Massachusetts area, makes computers that are virtually immune to operational shutdowns. The company accomplishes this goal by creating "fault-tolerant" systems, an industry term that essentially describes a type of system that can shift responsibilities from one system component to another if there is a failure.
The company has used this expertise to offer hardware, operating systems, and application middleware for telecommunications carriers in recent years, essentially providing the "brains" that allow a call to be routed through the right equipment to get to its destination.
"Conceptually, if Ascend is going to go it alone, this type of purchase is a pretty reasonable thing," said Craig Johnson, principal analyst with the Pita Group.
Ascend has been rumored as a likely target for Lucent once regulatory shackles come off related to the telecommunications equipment giant's separation from former parent AT&T.
Ascend has just digested last year's multibillion merger with Cascade Communications, a move that most pundits believe was fraught with issues that distracted the firm. "Done well I think this could really add a lot of revenues to Ascend," Keneipp said. "But they don't have a great history of doing these things well."