Lucent Technologies' data networking executives went shopping again today, this time returning home with new purchase ATM access switch vendor Yurie Systems, but with $US1 billion less cash in the bank.
Based in the US, Yurie sells ATM (asynchronous transfer mode) wide area network (WAN) access equipment to communications service providers, corporations and users in the government sector.
Asked why Lucent was willing to pay $US1 billion for a company that in fiscal 1997 had revenue of only $US51 million, Bill O'Shea, president of Lucent's Data Networking Systems group said Yurie's revenues are sure to increase.
"They are early to market with leadership products in a market that's about to explode," O'Shea said in a teleconference yesterday. "Our expectation is that the top line is going to expand very rapidly."
Dataquest's research shows a compound annual growth rate of 58 percent for the WAN ATM access market, which is set to grow from $US205 million in 1997 to $US1.8 billion in 2001.
In addition, Dataquest predicts the market for high speed ATM concentrators -- those supporting up to OC3 speeds (155Mbps) -- will grow from $US65 million in 1996 to $US1.1 billion in 2001, a compound annual growth rate of 57 per cent, Hunt said.
Lucent said in September of last year it wanted to become a serious player in the data networking market, and over the past six months, the company has been busy building up its product portfolio through several acquisitions. In January this year, Lucent acquired gigabit Ethernet switch maker Prominet and in December 1997 the company bought remote-access product maker Livingston Enterprises.
Under the terms of the agreement approved by the boards of both Lucent and Yurie, Lucent will begin a cash tender offer for all outstanding shares of Yurie common stock for $US35 a share. The offer is expected to commence no later than April 30 and will be scheduled to close by May 28.
Jeong Kim, chairman and CEO of Yurie, will join Lucent as president of Carrier Networks within the Data Networking Systems group. The company will remain headquartered in Landover, where it can best serve its many customers in the government sector, Lucent's O'Shea said.