Bay News:
Fresh Air At Bay Networks
Forrester Network Strategy Service Brief
8 November 1996
Authors: Brendan Hannigan and Paul Callahan
After dismal quarterly results, Bay Networks last week appointed long-time Intel senior executive David L. House as
chairman, president and CEO. Forrester recently caught up with the new CEO to probe his plans for the embattled
networking products company.
- On his strengths. "I am decisive -- and that makes for a clear decision-making process. I may not always be right, but I am
never in doubt. The company overall needs to understand how to make decisions at every level. We must empower our
employees to do this. The industry is changing too quickly to get hung up on decision-making."
- On the brain drain. "We must make visible changes so employees understand that this is a different Bay -- with clear
direction. We will engage third-party help to survey a statistically significant sample of the Bay work force. We want to know
what employees believe is wrong, what's in the way, and what they think of the management team. We must get everything out
on the table and stop the talent outflow."
- On the networking industry. "The networking industry will look very different in five years than it does today. I intend to
make sure that Bay exploits this transformation. We must tune our antenna and react quickly to change."
- On pitfalls to avoid. "Companies must resist falling in love with their own strategies. One of the biggest mistakes is thinking
that what was successful in the past will be successful in the future. You must continually kill your own technology -- not
become slaves to your own installed base and market position."
- On Cisco. "Chasing Cisco is a bad strategy. Shooting for being number two is a bad strategy. I joined Intel when it was only
a $68 million chip maker. At the time, everyone thought Motorola and Xilog ruled the world. Now Intel is the leader, but in a
very different business. Our goal is to be the leader, but in a much changed networking business. This won't happen overnight."
A "House" Cleaning for Bay?
House's immediate plans are sound: Stop the employee exodus and chart a direction for the rudderless company. After only
five days on the job, his speedy appointment of Intel's Dave Shrigley as VP of sales and marketing is a good first move. What
else should he do?
- Interview the refugees. In the first 90 days, House should seek out the Bay expatriates and find out why they jumped ship --
particularly those who ran off to start competing companies.
- Buy them back. Like Cisco, Bay should start an acquisition binge. If the purchases are smart, Bay's valuation will rocket,
queuing up more money for more acquisitions. Bay's purchase of Centillion resulted in an entirely fresh switching architecture
overnight.
- Commit to IP switching. Ipsilon has put its IP switching protocols in the public domain. Bay should join Digital and Fore
Systems in supporting IP switching. Cisco invented "tag switching" simply to counter Ipsilon's ideas. Adding Ipsilon's protocol
to Bay's beefy routers and switches would make IP switching more than just a nice idea.
- Focus. Bay has plenty of problems in its core business of LAN switching and routing. House must focus on fixing these first
making sure that he has best-in-class hardware and software to fend off a Cisco assault. In the carrier and Internet market
help is needed -- to gain competitiveness without getting too distracted from the corporate LAN market. Bay should partner
closely with Cascade to get a leg up. |
