Ascend Communications Reports First Quarter 1999 Financial Results -- Revenues Increase 67% Compared with First Quarter 1998.

ALAMEDA, Calif.--(BUSINESS WIRE)--April 27, 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, today 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.

For more information about Ascend and its products, please visit the Ascend Web site at www.ascend.com, or send e-mail to [e-mail]. For Investor Relations, please call our communications hotline at 800/648-3059 or 760/704-4423 (outside the US & Canada). Additional investor information can also be accessed on our Web site at: http://www.ascend.com/662.html. Ascend is headquartered at One Ascend Plaza, 1701 Harbor Bay Parkway, Alameda, Calif. 94502; phone is 800/ASCEND4 and fax is 510/814-2300.

This release, other than historical financial information, contains forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from actual future events or results. For instance, factors which could cause actual events or results to differ from anticipated events or results include the rate of development of new and enhanced technology by Ascend and its competitors, the integration of new businesses, the timing of introduction and market acceptance of new products by Ascend and its competitors, competitive pricing actions and marketing programs, among others. Readers are referred to the documents filed by Ascend Communications with the Securities and Exchange Commission, specifically the most recent reports on forms 10-K and 10-Q, which identify important risk factors which could cause actual results to differ from those contained in the forward-looking statements. -0-

                      Ascend Communications, Inc.
       Combined Consolidated Statements of Operations, Unaudited
                 (In Thousands, Except Per Share Data)

                                           Quarter Ended March 31,
                                              1999         1998
                                           ---------    ---------

Net sales                                  $ 509,395    $ 305,114
Cost of sales                                192,026      109,810
                                           ---------    ---------
     Gross profit                            317,369      195,304

Operating expenses:
     Research and development                 83,904       40,988
     Sales and marketing                     100,530       67,339
     General and administrative               17,135       10,044
     In-process research and development     (23,919)          --
                                           ---------    ---------
        Total operating expenses             177,650      118,371
                                           ---------    ---------

Operating income                             139,719       76,933
Interest income                               10,862        4,964
                                           ---------    ---------

Income before income taxes                   150,581       81,897
Provision for income taxes                    41,798       29,525
                                           ---------    ---------
Net income                                 $ 108,783    $  52,372
                                           =========    =========

Net income per share - Basic               $    0.49    $    0.27
                                           =========    =========
Net income per share - Diluted             $    0.46    $    0.26
                                           =========    =========
Number of shares used in per share
 Calculation - Basic                         221,900      192,849
                                           =========    =========

Number of shares used in per share
 Calculation - Diluted                       238,685      203,245
                                           =========    =========


                      Ascend Communications, Inc.
            Combined Consolidated Balance Sheets, Unaudited
                            (In Thousands)

                                   March 31,         Dec. 31,
                                     1999              1998
                                 ----------        ----------
ASSETS
Current assets:
 Cash, cash equivalents
  and short-term investments     $  708,051        $  679,955
 Accounts receivable, net           453,968           390,103
 Inventories                        242,449           197,896
 Other current assets               231,715           209,117
                                 ----------        ----------
   Total current assets           1,636,183         1,477,071

Investments                         525,861           457,387
Property and equipment, net         283,203           282,260
Other assets                        319,916           314,760
                                 ----------        ----------
   Total assets                  $2,765,163        $2,531,478
                                 ==========        ==========


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and
   accrued liabilities           $  456,667        $  426,286
                                 ----------        ----------
  Total current liabilities         456,667           426,286

Deferred income taxes                11,030            11,048

Stockholders' equity:
  Common stock                          222               220
  Additional paid-in capital      2,117,505         2,022,968
  Retained earnings                 179,739            70,956
                                 ----------        ----------
    Total stockholders' equity    2,297,466         2,094,144
                                 ----------        ----------
    Total liabilities and
     stockholders' equity        $2,765,163        $2,531,478
                                 ==========        ==========