Financial: Ascend Communications Reports First Quarter 1999 Financial Results — Revenues Increase 67% Compared with First Quarter 1998 - Company Financial Information

EDGE, On & About AT&T, May 3, 1999

Ascend Communications, Inc. (NASDAQ:ASND), a leader in wide area networking (WAN) and Intelligent Networking (IN) solutions for providers and users of the next-generation public network, Tuesday reported financial results for the first quarter ended March 31, 1999.

First quarter net sales were $509.4 million, compared with $305.1 million for the same period a year ago, representing an increase in revenues of 67%. Excluding the effect of the credit to in-process research and development, as discussed below, net income was $84.9 million or $0.36 per share, diluted. These pro forma results represent growth in net income of 62%, compared with $52.4 million or $0.26 per share, diluted, in the first quarter 1998.

During the first quarter, Ascend recorded a credit to the purchased research and development expense related to the acquisition of Stratus Computer, Inc., in the fourth quarter of 1998. The credit resulted from the reallocation of negative goodwill arising from the sale of the non-telecommunications business units of Stratus and positively impacted net income for the quarter. As a result, actual net income for the first quarter was $108.8 million or $0.46 per share, diluted.

"We are extremely pleased with the first quarter performance across all areas of the business, particularly in the Access Switching Division where reported revenues were better than expected," said Mory Ejabat, Ascend Communications' president and chief executive officer. "Our results clearly indicate a broad acceptance of the Ascend products within the growing public service provider market and affirms our momentum in the marketplace."

Ejabat continued, "Public telecommunications is a rapidly growing industry where the volume of Internet, voice, video and corporate data communications are driving the need for next-generation, integrated, packet-based technologies suitable for carrier-class networks. Ascend is committed to designing, building and delivering these key technologies for our customers to be successful as they expand their capabilities on a global basis."

The company continued to expand its next-generation product offerings this quarter with the introduction of Channelized DS3 Frame Relay and IP Multi-Protocol Label Switching (MPLS) modules with new high-availability features for the CBX 500 ATM switches. Ascend is currently the only vendor delivering a carrier-class implementation of the emerging MPLS standard on all WAN switching platforms, and is the only equipment vendor delivering an integrated carrier-class platform for ATM, Frame Relay and IP.

In access switching, Ascend announced delivery of an ATM OC-3/STM-1 card for the high-density Max TNT and DSLTNT platforms, enabling service providers to connect directly to core ATM networks. Additionally, Ascend announced that it is the first company to ship high-speed Symmetric Digital Subscriber Line (SDSL) with 2.3 Mbps. This new multi-rate technology allows service providers the ability to create tailored next-generation services, including real-time conferencing, high-speed multimedia technologies and remote office applications.

This quarter, the latest figures from several industry analyst groups confirmed the company's leadership position in numerous WAN switching segments. Reports covering the fourth quarter of 1998, from Cahners In-Stat and Synergy Research, recognized Ascend as the number one leader in worldwide ATM, Frame Relay and Multiservice WAN switching markets to service providers. Also in the fourth quarter 1998, Ascend was recognized by Dell'Oro, Dataquest, and Cahners In-Stat as the number one leader of Remote Access Concentrator ports shipped worldwide.

"Our continued market leadership and success in delivering key technologies for the next-generation public network has clearly made Ascend successful as an industry leader in this marketplace," Mr. Ejabat said. "Together with Lucent, we will be able to serve more markets and reach more customers than ever before by providing a more robust, end-to-end solution."

In January, Ascend announced an agreement to merge with Lucent Technologies Inc., a leading supplier of telecommunications equipment and services. The transaction will be accounted for as a pooling of interests where, under the terms of the agreement, each share of Ascend will be converted into 0.825 shares of Lucent. The exchange ratio has been adjusted to 1.65 to reflect Lucent's recent 2-for-1 stock split.

Concluding, Mr. Ejabat said, "Clearly our customers want to build and deploy new multiservice networks that encompass data, voice, optical networking, wireless networking, communications software and service solutions. Under the combined companies, it is our intention to deliver these technologies, so that service providers can make the Next-Generation Public Network a reality." About Ascend Communications

Ascend Communications, Inc. (Nasdaq: ASND) develops, manufactures, sells and services wide area networking solutions for telecommunications carriers, Internet service providers and corporate customers worldwide. FMI: www.ascend.com.