Ascend Communications is to acquire Stratus Computer in an $800 million (#488 million) stock deal that is a further indication of how the Internet is forcing telecoms and computing companies together.

The companies are from entirely different backgrounds: Ascend makes communications gear used by telephone carriers and Internet service providers, while Stratus supplies high-end computers.

However, Stratus is divided into four business units: a telecom carrier business unit which includes the SS7 switches (the intelligent management of a telephone network), OSS (Operations Systems Software) and fault-tolerant platform; an Enterprise Computer business unit; and two business units comprised of Financial and Enterprise Software (TCAM and S2). Ascend said these non-telecom businesses will be set up as separate subsidiaries which the company will sell off before the end of 1998.

With the acquisition of Stratus' SS7 switches, OSS and fault-tolerant platform, Ascend will be able to offer products to network service providers and carriers which will allow for the integration of voice and data networks.

This will enable network service providers to off-load data and voice from traditional voice switches, on to a single intelligent platform enabling them to better monitor and switch the traffic.

Mory Ejabat, CEO of Ascend, claimed: "This combination offers a new architecture for telephony networks, leapfrogging the competition by several years.

Our products, combined with Stratus' SS7 switches, OSS software and fault-tolerant platform, allow network service providers cost-effective, reliable and transparent means to relieve congestion while reducing operating costs on the Public Switched Telephone Network (PSTN)."

He added: "The rapid growth of the Internet has increased data traffic and strained the PSTN, forcing carriers to constantly expand their telecom backbones. In addition, deregulation is encouraging large service providers around the world to deploy networks that will support the integration of voice, video and data.

The deal is not such good news for about 500 of Stratus' 2,400 employees who are expected to lose their jobs immediately. Another 1,500 are believed to be going with the parts of the company being sold. Just 400 Stratus workers will end up at Ascend.

Simon Weedom, telecoms analyst at Deutsche Bank, believes the deal complicates a possible purchase of Ascend by Lucent Technologies, which many in the industry are predicting will happen in late September. "Ascend has agreed to take a $90 million (#45 million) restructuring charge this year in connection with the purchase and it will write off $200 million (#122 million) in goodwill over the next 10 years, which Lucent would have to swallow," he said.