NEW YORK-Lucent Technologies Inc., the Murray Hill, N.J., telecommunications equipment giant,
gobbled up two other properties last week.
In its bid to become a single-source supplier to a rapidly growing
industry with annual sales now totaling an estimated $200 billion, Lucent announced an agreement to buy Ascend
Communications Inc., the Alameda, Calif., computer network provider, for nearly $20 billion.
Earlier in the week,
Lucent said it would purchase Kenan Systems Corp., a billing software company based in Cambridge, Mass., for close
to $1.5 billion.
Lucent’s acquisitions are a reaction to several dynamic forces reshaping the telecommunications
industry, said Martin Dunsby, senior manager of telecommunications practice for Deloitte & Touche Consulting
Group, Atlanta.
Lucent, a heavyweight in provision of circuit-switched voice communications technology, has to
respond to the “fundamental technology shift to packet-switched (transmission), one big pipe into the customer
(premises),” he said. Ascend adds its expertise in Internet-style communications technology to Lucent’s suite of
offerings.
Secondarily, Dunsby added, telecommunications carriers today confront “aggressive deadlines and
goals for time to market, so they need one point of accountability.”
In this environment, telecommunications
services providers seek an alternative to their traditional practice of assembling and integrating their own systems from
the components supplied by various equipment vendors. Instead, they seek to do business with one-stop-shop
suppliers.
End users also increasingly are seeking one source for a variety of telecommunications services, and
carriers are looking to multiple-service offerings as a way to increase customer loyalty and revenues.
Ascend brings
the multiple-service conduit capability to Lucent’s portfolio. Kenan specializes in flexible billing, order processing and
customer analysis software, which supports a wide variety of wireless and wireline services, equipment and
networks.
The market opportunity is enticing because “all carriers have to buy all new technology for their
networks, whether new (carriers) or (those) upgrading existing systems,” Dunsby said.
Perry Walter, wireless
analyst with Robinson-Humphrey Co. in Atlanta, believes Lucent’s purchase of Kenan will spur other billing and
customer-care companies to consolidate to compete with the likes of Lucent.
“Bigger is better in a sense that
the more resources they can devote, the better they are,” he said.
Following Lucent’s acquisition
announcements, Standard & Poor’s Corp., New York, affirmed Lucent’s investment grade corporate credit ratings of
A/A-, giving Lucent debt a “stable outlook.”
“The ratings on Lucent reflect its strong market
position, technological strengths and broad, high quality product line,” Bruce Hyman, an S&P analyst,
said.
“These strengths are offset by aggressive competition, the potential for ongoing technology acquisitions,
increasing levels of vendor financing activity and the uncertainties of the rapidly evolving telecommunications
marketplace.”
RCR reporter Lynnette Luna contributed to this article.
