Ascend Communications Reports Third Quarter 1998 Financial Results.

ALAMEDA, Calif.--(BUSINESS WIRE)--Oct. 19, 1998--

Network Service Providers Fuel 37% Year over Year Revenue Growth

Ascend Communications, Inc. (Nasdaq:ASND) today reported financial results for the third quarter ended September 30, 1998. Third quarter net sales grew year-over-year by 37.0% to $370.3 million versus $270.4 million in the third quarter of 1997. Net income increased year-over-year by 64.7% to $66.1 million ($0.32 per share on a diluted basis) versus $40.1 million ($0.20 per share on a diluted basis) in the third quarter of 1997. Compared to second quarter 1998 results, this represents sequential growth in net sales and net income of 13.1% and 11.8%, respectively.

Commenting on the third quarter performance, Mory Ejabat, president and CEO said, "Our continued growth this quarter illustrates our leadership in providing products and services used to build next-generation networks. We are also pleased this quarter to show substantial growth year-over-year for both revenues and earnings, which is indicative of our strong commitment over the past year to strengthening the fundamentals of the business by focusing on areas such as product quality, organizational infrastructure and market development."

Continuing, Mr. Ejabat said "Revenues for the quarter were fueled by substantial growth in Access Switching product sales where our advanced solutions, such as voice and fax over IP and Virtual Private Networking (VPN), have helped drive port demand in the service provider market." Ascend's development efforts continue to focus on providing value-added features that allow the Network Service Providers to increase revenue by offering new applications and services to their customers while reducing the operational costs associated with operating their networks. This quarter Ascend was named number one in remote access concentrator revenues to service providers for the first half of 1998 by research analysts such as Dell'Oro, Cahners In-Stat, Dataquest and IDC.

In the third quarter, Ascend announced the acquisition of Stratus Computer, which brings to Ascend Signaling System 7 (SS7) technology and expertise, fault-tolerant technology, intelligent networking and Operations Support System (OSS) software, and an experienced carrier sales and network integration organization. Commenting on the Stratus transaction, Mr. Ejabat said, "We have made rapid progress integrating these key technologies into Ascend's data networking portfolio for use in the next-generation network. Our Ascend Signaling Gateway (ASG), using Stratus' enhanced software and fault-tolerant platform is receiving positive feedback from customers who are evaluating the product in their networks today."

Commenting on the rapid integration of voice and data in carrier networks, Mr. Ejabat said, "There is a need to redesign the existing voice infrastructure to accommodate both voice and data traffic on a single, efficient network architecture, which we call the next-generation network. Our goal is to deliver the products and services that address this need - products that bring down operational costs while seamlessly integrating into existing circuit-switched networks. The acquisition of Stratus this quarter is a significant step to achieving that goal."

In the third quarter, Ascend also announced a joint development arrangement with Alcatel for next-generation Internet access solutions that will make high-speed data services a reality for businesses and consumers, while reducing costs for network service providers. New products to be developed include an IP Service Access Gateway and a high-speed "router on a card" for Alcatel's worldwide installed base of Central Office switches. Both products will use Ascend's high-speed IP-forwarding technology and serve to broaden the company's IP product offerings. The new arrangement also strengthens an existing distribution agreement, which is expected to expand Ascend's presence in international markets.

Looking forward to the remainder of 1998 and into 1999, Mr. Ejabat said, "We continue to see strength in the North American and European service provider markets, particularly with CLECs and other competitive service providers who are moving rapidly to deploy next-generation networks. We are also encouraged that spending on the next-generation network seems to be of the highest priority at most carriers. Moving forward, we believe we are well positioned to deliver the integrated solutions network service providers are demanding today and remain optimistic about our long-term prospects as one of the leading suppliers to service providers worldwide."

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. The results or events predicted in these statements may 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 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           Nine Months Ended
                             Sept. 30,                 Sept. 30,
                      ----------------------- -----------------------
                          1998        1997        1998        1997
                      ----------- ----------- ----------- -----------
Net sales              $  370,346  $  270,372  $1,002,815  $  874,805
Cost of sales             133,444      97,181     360,373     308,245
                       ----------- ----------- ----------- -----------
                       ----------- ----------- ----------- -----------
  Gross profit            236,902     173,191     642,442     566,560

Operating Expenses:

  Research and
   development             53,418      40,706     140,849     115,595
  Sales and marketing      72,553      66,499     207,616     179,616
  General and
   administrative          33,042       8,475      52,803      27,019
  Purchased research
   and development              -           -           -     231,100
  Cost of mergers         (18,279)          -     (18,279)    150,271
                       ----------- ----------- ----------- -----------
                       ----------- ----------- ----------- -----------
   Total operating
    expenses              140,734     115,680     382,989     703,601
                       ----------- ----------- ----------- -----------
                       ----------- ----------- ----------- -----------
Operating income (loss)    96,168      57,511     259,453    (137,041)
Interest income, net        6,276       6,161      17,163      17,739
                       ----------- ----------- ----------- -----------
                       ----------- ----------- ----------- -----------

Income (loss) before
 income taxes             102,444      63,672     276,616    (119,302)
Provision for income
 taxes                     36,368      23,544      99,083      52,648
                       ----------- ----------- ----------- -----------
                       ----------- ----------- ----------- -----------

Net income (loss)      $   66,076  $   40,128  $  177,533  $ (171,950)
                       =========== =========== =========== ===========
                       =========== =========== =========== ===========

Net income (loss) per
 share - Basic         $     0.33  $     0.21  $     0.91  $    (0.92)
                       =========== =========== =========== ===========
Net income (loss) per
 share - Diluted       $     0.32  $     0.20  $     0.86  $    (0.92)
                       =========== =========== =========== ===========
                       =========== =========== =========== ===========

Number of shares used
 in per share
 calculation - Basic      197,689     189,562     194,779     187,920
                       =========== =========== =========== ===========
Number of shares used
 in per share
 calculation - Diluted    208,515     199,838     205,805     187,920
                       =========== =========== =========== ===========
                       =========== =========== =========== ===========

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

                                              Sept. 30,      Dec. 31,
                                                1998           1997
   ASSETS
   Current assets:
     Cash, cash equivalents and                $  352,611  $  475,427
      investments
     Accounts receivable, net                     311,379     234,183
     Inventories                                  131,790      99,637

     Other current assets                         145,692     105,340
                                               ----------  ----------
                                               ----------  ----------
       Total current assets                       941,472     914,587

   Investments                                    420,625     101,212
   Furniture, fixtures and equipment, net         174,595     114,351
   Other assets                                    31,962       7,744
                                               ----------- -----------
                                               =========== ===========
            Total assets                       $1,568,654  $1,137,894
                                               =========== ===========
                                               =========== ===========

   LIABILITIES AND STOCKHOLDERS' EQUITY
   Current liabilities:
    Accounts payable and accrued liabilities      247,375     168,638
                                               ----------- -----------
            Total current liabilities             247,375     168,638

   Stockholders' equity:
    Common stock                                      199         191
    Additional paid-in capital                  1,052,937     878,455
    Retained earnings                             268,143      90,610
                                               ----------- -----------
                                               ----------- -----------
            Total stockholders' equity          1,321,279     969,256
                                               ----------- -----------
                                               =========== ===========
            Total liabilities and stockholders'
             equity                            $1,568,654  $1,137,894
                                               =========== ===========
                                               =========== ===========

-0-