Tech Industry

The week's news: Lucent snaps up Ascend

The networking industry takes another turn toward consolidation with the $20 billion merger, bringing together high-end Internet and telecom technologies.

Telecommunications equipment giant Lucent Technologies successfully proposed a $20 billion merger with high-end data provider Ascend Communications, the largest such deal in the history of the data networking industry.

Confirming rumors, the agreement positions Lucent to challenge archrival Cisco Systems and allows the firm to offer a wider set of networking equipment to hard-charging Internet service providers and upstart telecommunications carriers.

Ever higher
The stock deal, in which each share of Ascend stock will be converted to 0.825 shares of Lucent, more than doubles the purchase price paid by Northern Telecom for data player Bay Networks last year.

The agreement has already been approved by each company's board of directors, and is expected to close during Lucent's third fiscal quarter, which ends June 30, 1999.

A few Ascend shareholders sued, but the company said the suits were without merit.

Also this week, Lucent said it will acquire privately held Kenan Systems for $1.48 billion, to spur its entry into the market for software billing and customer care, and agreed to buy 12.2 percent of Spain's Amper for $49 million from Telefonica, starting an alliance that could make Lucent the biggest supplier to Spain's largest telecommunications company.

A winner
Following a two-week bidding war, Britain's Vodafone Group emerged victorious, acquiring AirTouch Communications for an estimated $56 billion. Bell Atlantic late Friday called off its talks with the wireless giant, amid concerns that the Baby Bell may have been biting off more than it could chew. The merged company, with a combined market capitalization of about $110 billion, will be the largest independent wireless company in the world.

Titans report
Apple, Intel, and Yahoo all posted better-than-expected quarterly earnings, while AMD fell short of expectations.

Apple stayed firmly on the comeback trail by reporting its fifth consecutive profit and its first year-over-year revenue growth in three years. Meanwhile, Intel turned in record revenues and earnings for the fourth quarter, although overall totals for the year were down from 1997.

Yahoo reported net revenues of $76.4 million, a massive leap from the $26.6 in net revenue reported for the same period last year. AMD too posted record revenues, but a design problem with the fastest versions of its K6-2 processor drove the company below expectations, and pricing pressures loom.

Online financial site MarketWatch.com shot out of the gate with an IPO that soared more than fourfold above its target price on the first trade of the day, leaping from 17 a share to as high as 90.

Call it the eBay effect: An Internet retailer shows interest in an online auction, and Wall Street promptly bids its stock price up 20 percent. Unlike most e-tailers and virtually all Net auction stocks, eBay is profitable and that fact hasn't been lost on the market.

Capital
Oracle announced a $100 million venture capital fund for investing in start-up companies developing Internet applications or services based on its software technology.

MP3.com won an $11 million investment by venture firm Sequoia Capital, a measure of legitimacy for the de facto standard for downloading music. MP3 is scorned by the music industry's establishment, but Sequoia has previously funded the likes of Yahoo, 3Com, Cisco, Apple Computer, and Oracle.

As prospects brighten for Apple's FireWire, formally known as IEEE 1394, the company has begun asking new licensees for royalties of $1 per port, but the scheme doesn?t seem to be popular with manufacturers looking to take advantage of the high-speed, ?plug and play? data transfer, and could slow the technology's adoption.

Iomega will purchase rival SyQuest's intellectual property and U.S. assets for $9.5 million, bringing to a close the pending patent litigation between the two storage makers and providing a glimmer of hope for SyQuest customers, suffering from a lack of product support.

Microsoft revealed details of its plan to buy a piece of network software provider Banyan Systems, announcing it will make an investment and commit $10 million to train its employees. Banyan offers a directory and tools that ease migration to Microsoft's Windows NT.

An independent effort to loosen Sun's control over the future of Java for industrial machines that need "real time" operating systems was quashed with a "no" vote that puts Sun back in the driver's seat. Separately, Microsoft appealed an injunction requiring it to modify Windows and Internet Explorer products containing Java.

New markets
Silicon Graphics debuted its Windows NT-based workstation, the company's first foray out of the Unix sphere and initial step toward recapturing the glory that once was.

Sun Microsystems will try to break into the telecommunications market with a new server guaranteed not to go down for more than five minutes of the year, offered in combination with software tying together telephone, computer, and other networks into one giant super network. The company will also provide consulting services for telecommunications companies who don't want to get their hands dirty while advancing Java as the technology for making it all possible.

AMD rolled out its first advanced K6-2 processors for notebooks and announced a design win with long-time Intel customer Toshiba.

Consumers and personal computer makers wanting to upgrade Pentium II systems by adding Pentium III processors should find it easy going because the chips share design features.

More speed
America Online members in Bell Atlantic's East Coast territory will be able to upgrade their Net access connection to DSL starting in mid-1999. AOL will offer the high-speed service for $40 per month, making the high-speed service only about $20 more than the price of regular dial-up service.

On the West coast, SBC Communications will speed DSL rollout in California and throughout Southwestern Bell's five-state service area. Prices will start at $39, or $49 with Net access.

Infoseek and Disney launched their much-anticipated Go Network in an uncertain effort to establish a new force in the portal arena.

As business software companies stumble, IT service companies are surging ahead. "Web-related work is accelerating in leaps and bounds," according to one analyst, echoing those who credit the boom to the corporate rush to put business applications on the Internet, the IT talent shortage, Year 2000 projects, and the European monetary conversion.

Also of note
Quote.com named a new chief executive and said it would remain independent, after discussions with ?several potential business partners? ... USWeb founder Joe Firmage stepped down as USWeb/CKS chief strategist to avoid generating negative publicity for the company as a result of his personal beliefs in alien intelligence ... Microsoft?s lead witness, MIT dean Richard Schmalensee, said he couldn?t identify a company whose operating system might supplant Windows ... The Mormon church banned its missionaries from using email so as to encourage their concentrating on their work.