Lucent Technologies (NYSE: LU) said Tuesday it will merge with International Network Services (Nasdaq: INSS) in a $3.7 billion move to target the growing market for next-generation networks. The purchase gives Lucent more ammunition as it takes on Cisco Systems, which reports earnings after the bell.
Shares in the Sunnyvale, California-based INS, the world's largest independent network consulting provider, closed at 47 7/16 Monday, just below their 52-week high of 49 1/2. Lucent shares closed at 63 5/8 , below a 52-week peak of 79 3/4. Cisco closed at 59 13/16.
Each share of INS will be converted into 0.8473 shares of Lucent, which makes the merger about $3.7 billion, or $54 an INS share, based on Lucent's Aug. 9 closing price of $63 5/8.
"The convergence of voice and data is driving tremendous demand for services and support. Businesses and service providers are looking for help in designing, managing, and evolving their increasingly complex multivendor networks,'' said Rich McGinn, Lucent Technologies chairman and chief executive officer. Lucent's partnership with INS, which helps design install and maintain networks, is expected to boost Lucent's expertise in data networking.
The acquisition may give Lucent the upper hand over rival Cisco Systems Inc., (Nasdaq: CSCO) which has traditionally had close ties with INS. Cisco owns about 7.8 percent of INS, and has an executive on INS's board. Cisco said Saturday it plans to expand ties with KPMG LLC, and invest $1 billion in the company's consulting branch to help design, install and maintain its networks.
Lucent has recently been beefing up with other data-networking acquisitions as telephone companies revamp for the onslaught of Internet data. It closed its acquisition of Ascend Communications in June and just added Nexabit Networks to its holdings.
Lucent delivered an upside surprise with third quarter earnings, and Cisco is expected to post profits of 20 cents per share for its fourth quarter after market close Tuesday. The company reported earnings of 16 cents a year ago.
INS will become part of Lucent's NetCare organization. John Drew, currently president and chief executive officer of INS, will lead the combined organization of 5,500 people. The merger is expected to be completed during Lucent's first quarter of fiscal 2000, which ends on Dec. 31, 1999.