A Cautionary Tale for emerging Fibre Channel Companies: The Customer is always right.
How Cabletron failed, the missteps of a onetime market leader.
By Luc Hatlestad
Red Herring magazine
From the October 1999 issue
In 1995 Cabletron Systems (NYSE: CS) riding high. At that year's NetWorld+Interop trade show in Atlanta, the network-switching company hosted one of the event's hottest parties: an invitation-only bash featuring Joe Piscopo at the Hard Rock Cafe. The comedian directed most of his schtick atCabletron cofounder and then-CEO Bob Levine, who was sitting in the front row. Afterward the two men, both avid power lifters, staged a friendly arm-wrestling match. Mr. Levine won handily.
Four years ago, Cabletron was poised to defeat many of its opponents. But since then the company, like the comedian, has plunged into near obscurity. With its mix of strong technology and a formidable sales force, Cabletron actually scared mighty Cisco Systems (Nasdaq: CSCO), whose insiders once pegged Cabletron -- not 3Com (Nasdaq: COMS), Bay Networks, or Ascend Communications, the other major players of the day -- as its most threatening competitor. Yet today the New Hampshire-based company is regarded as an also-ran, barely even sellable for parts.
How could this happen? With the benefit of hindsight, we can see that Cabletron's promise was more imagined than real, a dream that was perpetuated by the company, the media, and the analysts who followed it. What they all failed to recognize was that Cabletron's sales and acquisition strategies were simply wrong -- and even after this became apparent, company executives didn't react quickly enough. Many of the reasons for Cabletron's downward spiral follow Geoffrey Moore's list of failure modes for high-tech startups (see "The Anatomy of Failure"). The company was slow to adjust to changes in its markets as it clung to a sales philosophy that wasn't working anymore, it ignored customers' requests for single-vendor networks, and it was arrogant enough to believe that it didn't need help.
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"There, but for the grace of management, goes .... (fill in the blank)."
Douglas |
