STOCKREPORTS

Ascend Communications, Inc.

Nasdaq Symbol ASND

Recent Price 50.06 52 Wk Range 77.75 - 39.13

Yield Nil 12-Mo. P/E 14.9

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) NA Fair Value NA Risk HIGH Earn/Div Rank NR
Technical Evaluation: BEARISH since 06/97 Rel. Strength Rank (1 Lowest - 99 Highest) 55 Insider Activity NA

Overview 14-MAY-97

ASND agreed to acquire Cascade Communications for stock in March 1997, with ASND shareholders to retain 65% of the combined company. We expect the combination of ASND's expertise in remote access servers and CSCC's specialization in ATM and Frame Relay switching technologies to offer substantial synergies. Revenues should continue their strong growth in 1997, reflecting exceptionally strong demand for all of the company's products. Ascend's MAX line of WAN access switches and Pipeline family of remote LAN access servers have become the products of choice for Internet service providers (ISPs), telecommuters and individuals who need remote access to their networks. The company continues to innovate and to introduce new products to broaden its product lines. Customers have shown very strong interest in two of the company's newest products, the MAX TNT and the GRF 400, which should bolster revenue growth in 1997.

Valuation 14-MAY-97

In our view, Ascend and Cascade have complementary products that will enable the combined company to offer end-to-end solutions to telephone carriers and ISPs. ASND's remote access products will reach the public carrier market through CSCC's strong distribution channel and CSCC's Frame Relay products will be opened up to international markets through ASND's international channels. Moreover, the new Ascend will be much better positioned to challenge Cisco and the combined 3Com-U.S. Robotics. The company expects the acquisition to be mildly dilutive for 1997 and accretive to share earnings in 1998. Given a blended growth rate of 35-40% for the combined companies, we recommend purchase of ASND shares, which were recently trading at 20X our 1998 EPS estimate of $2.35.

Key Stock Statistics

Fiscal Year Ending Dec. 31

Dividend Data: No cash dividends have been paid.

Business Summary 14-MAY-97

Ascend Communications develops and manufactures high-speed digital remote networking access products that enable its customers to build Internet access systems, extensions and enhancements to corporate backbone networks, and videoconferencing and multimedia access facilities. These systems establish high-speed switched digital connections whose bandwidth, duration and destination can be adjusted to suit user application needs.

ASND's Multiband family of controllers is used for videoconferencing and multimedia networks and provides global bandwidth-on-demand at speeds from 56 kbit/s to 4 Mbit/s using switched digital services. The Multiband Plus product supports four simultaneous high-speed digital connections; it also incorporates inverse multiplexing, dynamic bandwidth allocation, global connectivity and comprehensive management capabilities. Sales of Multiband products accounted for 5% and 15% of net sales in 1996 and 1995, respectively.

The MAX family of integrated access servers provides bandwidth-on-demand for wide area network (WAN), Internet and multimedia access over a common set of digital access lines. The MAX can be configured with Multiband cards, providing up to 38 high-speed inverse multiplexing ports, or with Pipeline Ethernet cards and digital modem cards to act as a central-site remote LAN access server, allowing up to 672 remote users. In late 1996, ASND introduced the MAX TNT, a carrier class WAN access switch. MAX sales accounted for about 82% and 63% of net sales in 1995 and 1994, respectively.

The GRF family of high performance IP switches, introduced in September 1996, enable carriers and ISPs to handle the high-bandwidth requirements of demanding network environments such as the Internet. GRF switches are able to deliver scaleable performance up to 10 million packets per second with 16 gigabits per seconds of bandwidth.

The Pipeline product family provides access equipment for remote office, telecommuting and small office/home office (SOHO) and Internet access. Pipeline sales accounted for about 12% and 20% of net sales in 1996 and 1995, respectively.

Important Developments

Mar. '97 ASND agreed to acquire Cascade Communications (CSCC), a provider of ATM, Frame Relay and IP switching products. Under the terms of the agreement, each CSCC share will be exchanged for 0.70 ASND shares. Based on the closing price of Ascend shares on March 27, 1997 (52), the deal was valued at approximately $3.7 billion. The transaction is expected to close in the third quarter.

Capitalization

Long Term Debt: None (3/97).

Curr. Ratio	5.5	7.0	5.3	4.5	6.0	NA	NA	NA	NA	NA
% LT Debt of Cap.	Nil	NM	0.2	3.2	4.6	7.4	17.6	NA	NA	NA
% Net Inc.of Revs.	20.6	20.4	22.1	8.3	NM	NM	NM	NA	NA	NA
% Ret. on Assets	22.1	15.7	10.4	12.1	NM	NM	NM	NA	NA	NA
% Ret. on Equity	25.9	18.0	NM	15.2	NM	NM	NM	NA	NA	NA

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--1275 Harbor Bay Parkway, Alameda, CA 94502. Tel--(510) 769-6001. Fax--(510) 814-2345. Website--http://www.ascend.com Pres & CEO--M. Ejabat. VP-Fin & CFO--R. K. Dahl. Investor Contact--Paula Cook. Dirs--B. Atkins, R. K. Dahl, M. Ejabat, R. L. Evans, C. R. Kramlich, J. P. Lally, M. Schoffstall. Transfer Agent & Registrar--Bank of Boston, Canton, MA. Incorporated--in California in 1989; reincorporated in Delaware in 1994. Empl-- 721. S&P Analyst: Aydin Tuncer

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997