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Ascend, Lucent Seal $20 Billion Marriage

Capping days of speculation, Lucent Technologies and Ascend Communications Wednesday announced they were merging in a $20 billion deal.

The two companies hope that by combining, they will strengthen their capabilities in data networking, allowing them to challenge market leader Cisco Systems Inc.

Each share of Ascend will be converted into .825 shares of Lucent. Based on Tuesday's closing prices, the deal would be valued at about $20 billion. The boards of both companies have already approved the merger. However, the deal still needs approval from Ascend shareholders.

Lucent expects the deal to close by the end of its fiscal third quarter, which ends June 30. The company expects the merger will begin contributing to earnings in fiscal 2000.

The companies also plan to establish a broadband networks group, which will be led by Dan Stanzione, Lucent's chief operating officer and group president. The broadband unit will focus on delivering broadband, multi-service networks. The new group will consist of Ascend's operations and Lucent's data and optical networking and communications software groups.

Ascend President and Chief Executive Officer Mory Ejabat said the deal will take Ascend to the next level.

"Lucent enables us to give customers a more robust, end-to-end solution and it complements Ascend's market-leading technology. The merger will give our people the chance to join an industry leader that has been driving change across the full range of communications networking technologies.

"The deal is a perfect fit. Lucent and Ascend already have a strong record of smoothly teaming together on customer opportunities and the Ascend ATM Core Switch is already a critical component of Lucent's data networking portfolio," he said.

Ejabat plans to stay with Lucent through the transition.

Rich McGinn, Lucent's chairman and chief executive officer, said the merger positions Lucent to be a networking leader.

"Virtually ever major service provider worldwide is making decisions on how to engineer and deploy its new or evolving network for data, voice, fax and video services. On the short list of companies that service providers want to work with, Lucent and Ascend together will lead the pack. This merger makes our portfolio broader and more powerful and gives us the edge as we develop the next generation of networks," he said.

Lucent has worked hard to transform itself from a company primarily known for voice networks to one that is also an expert in data. Lucent has acquired 11 data networking companies over the past two years, enhancing its portfolio of intelligent switching and network management products.