Ascend Communications Inc closed its third quarter by finalizing the acquisition of Stratus Computer Inc and disclosing that it has several bids for the enterprise systems part of Stratus’ business which it plans to sell-off, while it keeps the telecommunications business. Ascend disclosed that Stratus’ third quarter will come in at some $130m revenue, down 25% on $175m last year. European and Japanese revenues were down, while North America was stable. 51% of Stratus’ business is telecoms related; 49% enterprise. 60% of revenue is product-related, 405 is services. Ascend, which will take a $305m charge for writing off in-process research and development in its fourth quarter – an increasingly suspect accounting practice (CI No 3,519) – and expects Stratus to provide it a total revenue gain of around $460m, before any sell-off. Ascend says it has already integrated some of Stratus’ key SS7 System Signaling 7 software with its own products and has some customers used the integrated solutions. It expects to announce the sale of Stratus’ enterprise business around the end of November. Of Ascend’s third quarter net income that rose 64% to $66.07m compared with $40.12m last time on revenue which rose 37% to $370.3m over $270.4m last time. Ascend said ISP and carrier spending is still driving its business while traditional circuit switch spending is declining. System switching business rose 30% over the same quarter last year, while call switching rose 53% and enterprise access was up 14%. Access switching is now 47% of its business; call switching 41%, services 5% and enterprise access 7%. North America accounts for 70% of revenue, international operations accounted for 30%. The Japanese contribution weakened, mainly due to the late delivery of software to a key customer, although Latin America and Asia Pacific business increased overall while European business declined. North America was down 3% sequentially. Carriers account for 43% of total revenues; ISPs 27%; and end users and corporates 13%. Alcatel SA accounts for 10% of its revenue. The company says it will soon announce new products that will replace its GRF IP switches by mid-to-late 1999.
