Lucent to buy Nexabit, gain a step on Cisco

Switches and routers in $900 million deal


June 26, 1999|By BLOOMBERG NEWS

MURRAY HILL, N.J. -- Lucent Technologies Inc., the world's No. 1 phone-equipment maker, said yesterday that it will buy Nexabit Networks Inc. for about $900 million in stock, getting the switches it needs to send data along the Internet at high speeds.

Lucent will issue about 14 million shares for Nexabit, a closely held developer of so-called terabit routers, which are faster than existing routers from No. 1 Internet-equipment maker Cisco Systems Inc. The purchase is expected to close by July 31.

Although Lucent also bought Cisco rival Ascend Communications Inc. this week for $25.2 billion, it still lacked a product to compete with Cisco's most profitable gear. Nexabit's router is being tested by long-distance provider Frontier Corp. and other phone companies, and when ready will give Lucent a complete product line as it pushes into data networking.

"This was a piece Lucent had to have," said Craig Johnson, an analyst with market researcher Pita Group in Portland, Ore.

Lucent's purchase of Marlborough, Mass.-based Nexabit is the latest of a maker of equipment for Internet Protocol, or IP, the standard method for packaging information on the Internet. Ericsson AB bought Torrent Networking Technologies Corp. for $450 million in April. In March, Siemens AG snapped up Redstone Communications Inc. for an undisclosed amount.

Shares of Lucent fell 31.25 cents to $63.6875 yesterday.

Lucent said the acquisition would not be a drag on its earnings in fiscal 1999 or fiscal 2000, which end in September. The company expects sales of Nexabit products to exceed $100 million in fiscal 2000.

Sales of large IP routers and switches will swell to $5.5 billion in 2003 from $169 million this year, according to Ryan Hankin Kent Inc., a market researcher. Lucent has a similar forecast, said Dan Stanzione, its chief operating officer and group president of broadband networks.

Pub Date: 6/26/99

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