Networking shares soar on merger mania

Following the multibillion-dollar deal announced between Lucent Technologies and Ascend Communications this week, shares in networking companies enjoyed sharp gains in anticipation of an acquisition domino effect. Many networking stocks ended the week at or near record highs.

The deal between Lucent, the telecommunications equipment giant, and Ascend, the high-end data provider, caps months of merger rumors and speculation. The move pushes Lucent into more direct competition with networking giant Cisco Systems, which may be looking for pairings of its own to maintain its competitive edge. The move also heightens Lucent's competition with another telecom equipment behemoth, Nortel Networks

Ciena, Tellabs, and Advanced Fibre Communications all gained toward the end of the week on talk that the companies might be ripe for a possible takeover.

Cisco itself ended the week on a positive note after an initial fall as the Lucent-Ascend deal was announced. Shares gained 5.3125 to 101.6875, just under a 52-week high of 108. Cisco has been linked to both Ciena and Advanced Fibre in the past and maintains a well-regarded approach to acquisitions, according to industry analysts.

Shares of Ciena spiked the day the Ascend-Lucent deal was announced, hitting a intraday high of 19 with some 24 million shares traded. Ciena ended the week higher, up 0.25 to 18.9375. The troubled stock has traded as low as 8.125--but as high as 92.3750--in the past 52 weeks.

Advanced Fibre shares also benefited from merger rumors. The company's stock, which has wallowed in single-digits since last November, jumped once it was named as a possible takeover candidate. Shares ended the week up 0.25 to 13.75.

Tellabs shares surged Wednesday following the merger news on very heavy volume, with more than 43 million shares traded. The communications equipment maker ended the week up 5.25 or 6.5 percent to 85.9375.

Other networking companies gained market value as investors speculated on the next big move in the ever-consolidating networking market. Newbridge Networks peaked at a midday high of 39 on Wednesday with some 33 million shares traded, only to end the week up 1.625 to 36.875.

Fore Systems, another possible takeover target, added 0.125 to 20.25.

Newbridge and struggling Cabletron Systems have reportedly solicited help from investment bankers as they explore their options in a market in which much larger firms continue to flex their muscle.

Lucent ended the week strong, up 4.25 or 4 percent to 110.1875. The stock has traded as high as 120 and as low as 37.0938 in the past year. Ascend shares added 4.0625 or 5 percent today to close at a new 52-week high of 86.1875.

Also waiting in the acquisition wings are a slew of international communications players, such as Alcatel, Siemens, and Ericsson, among others.