FOOL CONFERENCE CALL SYNOPSIS*
By Dale Wettlaufer (TMF Ralegh)

Ascend Communications
<% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
One Ascend Plaza, 1701 Harbor Bay Pkwy.
Alameda, CA  94502-3002
(510) 769-6001
http://www.ascend.com

ALEXANDRIA, VA., (April 27, 1997) /FOOLWIRE/ -- Ascend Communications Corp. reported on April 10, 1997 its first quarter fiscal 1997 results. Sales were $202.4 million with net income of $46.3 million or $0.36 per share before an $18 million charge for purchased R&D from InterCon Systems.

ACQUISITIONS. During the quarter they announced three acquisitions. InterCon Systems, which closed in February, will position Ascend to provide a more competitive and better class software for corporate and enterprise use and also for Internet providers with the introduction of Internet Valet. Whitetree Communications, which closed on April 1, will give them technology that will aid them in their next generation platform and the TNT platform by providing additional functionality. The CASCADE COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CSCC)") else Response.Write("(Nasdaq: CSCC)") end if %> deal was announced at the end of March.

COMMENTS FROM CEO MORY EJABAT. Ascend continues to see strong demand in the Internet and carrier markets. In the Internet market, sales have been strong both in the consumer-oriented providers and the large niche national providers. In the past quarter MFS, UUNet, AOL, and AT&T have each publicly assigned large scale network expansion plans. ISPs focused on consumer business continue to add capacity with their need for increased capacity driven both by increasing number of customers and by existing customers continuing to stay online longer. They see more ISPs moving to the 10 subscribers per port metric, down from over 20 subscribers per port as recently as a year ago. They also see a strong growth in the sector of national ISPs that cater to business customers. Customers such as UUNet, PSI, and Erol's continue their very aggressive rollout both to provide services to corporate customers as well as serving as the backbone for many smaller ISPs. The increase in subscribers and longer online time increases demand on the Internet infrastructure. Internet traffic through the NAPs continues to grow at approximately 10% per month. Ascend continues to extend its lead as the pre-eminent provider of access equipment to ISPs. In January the company announced that during the fourth quarter of 1996 alone they added over 330 new ISPs as customers. In February, in addition to adding new ISPs, they announced that Ameritech had standardized on their access product for their new Internet access services and Media City also standardized on Ascend equipment for extending their Internet network. They also continue to see increased momentum in the carrier market. The planning and buying decisions made by the company through 1996 are now resulting in larger-scale network infrastructure deployment. Ascend has expanded its carrier customer base with the addition in January of both the Bell Atlantic Network Integration Group and Telia AB. The customers are using the Pipeline MAX and MAX TNT products to expand corporate Internet access and corporate remote access. Ascend believes that the ISP and telco markets combined represent the fastest-growing segment within the networking space.

MARKET FORECAST. Based on the Q4 research, access concentrators and sales through the ISPs and telcos are projected to increase by approximately 70% year-over-year, to approximately $1.7 billion in 1997. In the backbone router IP switching space, this customer group is projected to increase purchases by approximately 50%, to about $1.5 billion in 1997. Ascend has continued to increase its market shares in both of the fastest growing markets. Its share of the access concentrator market [http://www.ascend.com/techdocs/techindex.html#market] has increased from 21.3% exiting 1995 to 35.6% in Q4 last year, according to Dell'Oro Group.

MAX TNT. Customer acceptance and demand for the TNT was very strong this quarter. They announced that UUNet, Media City, and US West !nterprise arm had all standardized on the TNT for the deployment of their intranet networks. As expected, Ascend is recognizing venture revenue for the TNT this quarter which, combined with the traditional members of the MAX product family contributed to about 87% of revenues in the quarter. In their January conference call they said that the number of TNTs in the backlog was, at that time, about 700 units. At the end of Q1, bookings for TNT was 900 units, shipments were 870 units, and the ending backlog was about 730 units, giving the company a positive book-to-bill ratio on the TNT product.

GRF. Ascend also experienced strong demand for GRF products in the quarter. The company announced agreements with PSINet, Savis Communications, Media City, and one other company for inclusion of the GRF 400 in their networks. In February, the company announced a new member of the GRF product family, the GRF 1600. This product provides 10 million packets per second of throughput, a transmission rate 100 times faster than traditional routers. Because of the initial costs are defined on the GRF, the company recognized revenues on the product ahead of plan, though GRF revenues represented only 3% of total revenues during the quarter.

xDSL. Ascend has seen increasing momentum in the xDSL (digital subscriber line) marketplace. The company's strategy with xDSL is to include every type of DSL in their MAX and MAX TNT product line as well as providing end-to-end connectivity with Pipeline family. The company pioneered IDSL technology with MFS and US West. In March, the company announced the shipment of its first SDSL line card and SDSLPipe-S family. This product is currently being evaluated by a number of RBOCs. In January, the company announced the Multiband MAX family of economical bandwidth on demand controllers, which are optimized for video conferencing and backup/overflow.

MARKET HIGHLIGHTS. Ascend products, including the GRF 400 IP switch and the MAX TNT, were awarded numerous industry honors in the quarter. In February, the company helped to establish the Open 56K Forum. Along with other industry leaders, the company will be working to establish a standard 56K modem protocol.

FINANCIALS. Bookings were strong in the quarter; as a consequence, the company's book-to-bill ratio remained above 1:1 and backlog grew sequentially. North America bookings were particularly strong, led by customer acceptance of the TNT and GRF. Bookings performance in the international market place was also particularly strong and slightly ahead of plan. Ascend has not yet introduced the TNT for general availability to international customers, pending type approval in international markets. Type approval has been received, though, in most countries and the TNT will be introduced by the company's sales force in April.

SALES. Sales reached another new high, increasing 14%, to $202.4 million, as compared to sales of $177.5 million last quarter. Sales mix was influenced by heavy focus in North America on the TNT product and by the manufacturing ramp-up of the TNT product, which began shipping in volume in the last week of December, 1996. Strong customer demand caused unusual revenue shifts during the quarter. North American revenues accounted for 66% of business, with international revenues accounting for the balance. In Q4, North America accounted for 48% of business with international revenues making up the balance. The most significant driver in this geographic shift was due to the North American focus on the TNT.

CHANNELS. ISPs, with which the company deals directly, accounted for 50% of revenues. Re-sellers accounted for 31% of revenues; carriers and OEMs accounted for 18% and the direct channel accounted for 1% of revenues. Q4 revenue mix was: ISPs, 24%; re-sellers, 54%; carriers and OEMs, 21%; and the direct channel, 1%. This quarter's mix mirrors the initial sales focus for the TNT. Initially, the company focused on selling the TNT within North America to the large ISPs with which the company has traditionally done business directly, as well as with carriers. The TNT was made available to the re-seller channel only during the latter part of the quarter. TNT demand was heavily influenced by demand from two of the company's largest customers, which have announced substantial ISP network expansions, each of which accounted for more than 10% of revenues during the quarter. UUNet accounted for 24% of revenues and BBN accounted for 12% of revenues.

PRODUCT MIX. Q1 product mix was: Access and concentrators, 87%; remote access, 6%; MultiBand, 3%; IP switching, 3%; all other, 1%. Q4 product mix was: Access and concentrators, 84%; remote access, 10%; MultiBand, 5%; services and other products, 1%.

PIPELINE REVENUES. Pipeline contribution to revenues dropped because of price cuts announced during Q4 1996. Unit shipments were relatively constant comparing Q1 to Q4.

MARGINS. Gross margin was 65.7%, at the upper end of the model, which is 64-66%. Operating expenses, including the one-time charges for the InterCon purchase, were 30.6% of revenues, virtually unchanged from last quarter. Operating margin was 35.1% before the InterCon charge, well above the high-20% model. Net income before the one-time charge, was $46.3 million, or $0.36 per share. Net income after the charge was $35.1 million, or $0.27 per share.

BALANCE SHEET. Cash and liquid investments at the end of the quarter were $459.7 million, an increase of $51 million over the last quarter. Accounts receivable DSO was 52 days, virtually unchanged from the end of December. Inventory turned over 5.5 times at the end of March, up from 5 times at the end of December. Number of employees was 844 people, up from 721 at the end of December.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.