MINNEAPOLIS, MINNESOTA, U.S.A., 1997 APR 4 (NB) -- By
Ian Stokell. When I said in my year-end column to look for
major consolidations in the networking industry, I didn't mean
quite so soon into the new year!
In my December 23, 1996 column predicting 1997 networking
events, acquisitions was one of the areas I said to look out
for, saying: "And finally, mergers and acquisitions between
large and small networking- and telecommunications-related
companies will also dominate the news. Just look at the last
month for example -- Newbridge Networks and UB Networks,
Bay Networks acquiring NetICs, Rockwell acquiring Cirrus
Logic's Pacific Communications Sciences's Wireless
Semiconductor Products group, Microsoft acquiring Netcarta,
and InnovaCom acquiring Antenna Technology
Communications. And that's just December! Large or small, if
you don't have the technology, buy a company that does!"
Who knew! Look at a couple of the acquisitions that have
already happened in 1997.
Just this week Newsbytes reported that Ascend
Communications Inc. announced it is acquiring Cascade
Communications Corp. in a stock deal worth about $3.7
billion. And last month, 3Com Inc. announced its intention to
acquire modem giant US Robotics in a deal estimated to be
worth $6.6 billion.
The trend in the industry seems to be towards major
consolidations in order to create companies capable of
providing networking and access products that allow for
end-to-end network connectivity, from the local area network
(LAN) across the wide area network (WAN). Customers
appear to want to buy from fewer vendors -- they want fewer
companies to provide the equipment on their networks.
And the prospect of non-traditional mega companies moving
into the networking arena has certainly spooked some
companies nervous about their role in the marketplace of the
future. Read Intel Corp. That company's move into the Fast
Ethernet network interface card (NIC) market, and how it
single-handedly, in one move, scythed into 3Com's traditional
market, has everyone thinking defense.
Was Ascend buying Cascade a move designed to thwart the
threat to Cascade of the 3Com/US Robotics deal? Cascade is
certainly in a better position to compete, now it has the
backing of Ascend. In fact, analysts contend, both companies
can now compete more effectively at the networking
equipment high-end, such as switches and high speed
products.
One of the major targets companies are aiming at with such
consolidations is Cisco Systems. But, at least on the face of
it, Cisco doesn't appear too worried. In a Newsbytes article
two weeks ago, entitled: "Cisco Not Threatened By
3Com-USR Merger," Ed Chapman, product manager for
Workgroup Switching Products in Cisco's Workgroup
Business Unit, said that in spite of the 3Com/US Robotics
merger, Cisco still offers "more" end-to-end solutions than
their closest competitor. In the article, he asserted that
Cisco's product line extends from low-end hubs to ATM
(asynchronous transfer mode) switches, and that it has
established a "dominant position" in high-end switches and
high-end routers.
Hmm, ask 3Com about its historical dominant position in
NICs, until the Intel 800-pound gorilla muscled in on its turf!
Chapman also cited an International Data Corporation report,
which apparently showed Cisco was ahead of 3Com in the
switched Ethernet products market by mid-1996, on a 37.6%
against 25.1% market share ratio.
But market share can be a dangerous playground to play in --
one corporate acquisition and the top dog can change.
One thing's for sure though -- judging by the first few months
of 1997, the game of musical acquisitions in the networking
industry is just picking up speed. There will likely be more in
the next few months.
And in the light of the recent 3Com/US Robotics and
Ascend/Cascade deals, they had better come sooner rather
than later. Those that hesitate are lost, as the old saying
goes.
If a company wants to maintain a dominant position in the
networking market place these days, the name of the game
appears to be "end-to- end connectivity." And the quickest
way to guarantee that is not to develop technologies and
products in-house that you don't have, that takes too long --
instead, you have to go out and buy a company that already
has it. |
