Although a lttle dated, good reading regarding FORE.
Note the part where at 19$ he sthinks was undervalued. SO, FORE at 13$ is way undervalued.
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At FORE Systems, all switches are
on and ready to go
By Robin Schreier Hohman
Network World, 5/4/98
Early this year FORE Systems, Inc. quietly promoted
financial whiz Thomas J. Gill to president and CEO,
replacing the more technical company founder Eric
Cooper, who remains as chairman. Network World
Senior Editor Robin Schreier Hohman spoke with Gill
about his style and his plans to expand FORE beyond
the world of ATM.
Q. Let's start with the basics. Fore's announcement,
in January, promoting you to CEO and president,
seemed to be a very quiet announcement. Not much
was made of it in the press. Was that deliberate?
A. Yes, I would say it was deliberate on my part.
I've been with Fore for over five years, in several
different capacities. During 1997, as chief operating
officer, I continued to take on an expanding role for
the company. But, as the Board had asked me and
Eric Cooper had asked me to take on the CEO and
president role in January, I didn't want it to be an
announcement about me. I really want Fore Systems
to be known for its capability and leadership position
and not for Tom Gill...There are a lot of greater
leaders in the company that are driving a lot of the
initiatives, and I thought it was more appropriate to
have more of a quieter transition, and a handoff from
Eric to me.
Q. Now, you said Eric asked you to take over.
Why is that?
A. It was part of a plan that really didn't become
something we were discussing actively until the
second half of calendar '97, as I took on the chief
operating role, in January of '97, over a year ago, we
continued to focus on the direction of the company
together, and where we were taking the product lines,
some of the markets we were focussed on. And as I
said, my role expanded, I just seemed to take on
more of the operations of the company. And
throughout the second half of '97, Eric had felt given
the amount of time I was spending on internal
operations, and my outward focus with customers,
and his desire, to have a bit of a less - a bit of a more
hands-off role, less hands-role, I guess, is the best
way to put it, less operational. I think Eric and the
board thought it made more sense to formally ask me
to take on the CEO role. Eric, today, is still very
much involved in the company, he's a very active
chairman, he comes in every day, which is a terrific
help to me, in terms of directing the company on our
technical architecture, strategy, and so on, going
forward.
Q. So, is this the type of thing that you see in a
maturing organization, where the technical side has to
give over, at some point, to the financial side?
A. This was an initiative that we started in the middle
of calendar 97, where we stated that we were going
to transform the company from a technology-oriented
company to a market-driven, customer-focused
company.
Q. Fore has been known more as a technical
company, and you're from the financial side. How do
you make sure you keep up with the technical
developments and know how to drive the organization
on that end of it? Who's the person you trust on that
end of it?
A. Well, there's a few people in the company. First,
Robert Sansom, who is one of the co-founders of the
company and headed up software engineering for a
number of years, is now chief technology officer for
Fore Systems, reporting to me. He's one of the
people that I would rely on for technical strategy and
advice and in terms of the direction of the product
line. And Eric is very much involved himself. Again,
he's a very active chairman, he comes to work every
day, he's very supportive of my role.
Q. But your job is to drive the business, the market
end of it.
A. Well, as far as my role as the CEO, is to drive
the overall business in terms of our strategy, including
both our product strategy but also our channel
strategy for sales and marketing, and continue support
the infrastructure for our group.
Q. Now, Fore's an ATM equipment supplier, but it
seems you've been looking to broaden, is that true?
Are you branching out a little bit more?
A. Yes, we are. We've continued to have a fairly
significant amount of our revenues outside of ATM,
anywhere from 25-35%, historically, has been driven
from contributions from LAN switching technologies
such as Ethernet and Token Ring. But the dominant
revenue generator in the company has been our ATM
product line. Our strategy is to continue to stay
focused on ATM in the enterprise, but also to expand
our solution on the Edge, and we've got a terrific
Edge strategy today and what we want to do is
continue to focus on how to expand that product line
and take it into our installed base, and also take the
existing switch we have into the markets as well.
Q. Now, what I've seen over the past six months,
from the users I've spoken to, is an evolution from
ATM or Ethernet to, well, maybe I'm going to need
both and maybe I'm going to need ATM in the
backbone and Ethernet to the desktop. Are you
seeing that same evolution?
A. Well, it's similar to what you're describing. Our
focus and the way we present our architecture to our
customers is, in the core of the backbone, we are
very adamant about ATM as the right backbone
infrastructure to support applications and all the
scalability capacity requirements over the long term.
Long term is three to five years in a planning cycle for
a network manager or an IT manager. On the edge of
the network, we have a bit of a different philosophy
where we will work with customers and understand
what applications they're running, what some of the
drivers are and the needs are in this business over the
next several years. And quite often customers of ours
will buy 10Base-T Ethernet for applications that
require it and in the same customer network they may
have OC-3 at the desktop, ATM, and it all depends
on their departmental requirements. So we don't
come into a corporation and say, it's got to be all
ATM on the desktop or it's got to be all Ethernet on
the desktop, it's really based on what their business
requires. And we're the only company that can
actually offer very attractive desktop ATM, and at the
same time offer very competitive switched Ethernet, at
the desktop or in the wiring closet, aggregating shared
hubs for some investment protection from the
customer standpoint, and on the back end of an ATM
backbone infrastructure. So we are very focused on
an ATM backbone infrastructure for the enterprise
and a mixture of technologies out on the edge. And
the edge is where we're going to broaden our product
line, both in the enterprise LAN and the enterprise
wide area networks as well, so we have a terrific
opportunity to continue to leverage. Both have done
well in both of these respective markets and expand
the product line there.
Q. So what kind of new products can we expect to
see?
A. Well, we've got a big focus on two areas in the
LAN. One is a stackable switches, 10/100 stackable
switches that are priced competitively with the today's
market. Today we have a modular product that is
very, very solid and sells very well but is under a bit of
price pressure on the edge, and we continually adjust
the pricing to bring it down near street price, where
required, and we do that.
Q. What product is that?
A. The product I'm referring to is our 3810 product.
It's a very attractive product and it's priced
appropriately for a modular product. But when it
competes against stackable 10/100 products, it's a bit
higher priced, naturally. So our goal is to bring
product to market as quick as possible that are
10/100 stackable products that are very price
competitive. And, the value that we bring on the edge
is we sell the best integrated switched Ethernet to
ATM interfaces in the market today. The best
integrated edge to ATM backbone infrastructure
solution that you can buy today That's our value-add.
Especially as the Ethernet edge becomes much more
commoditized, we want to make sure we bring value
to our customers in the ATM integration.
Q. Now, on the 10/100 stackables, do you plan to
build those yourselves to drop the price of your
existing products, or to OEM others?
A. Currently we're just adjusting our price on our
existing products to meet the requirements in the
marketplace today. Over the long term, we've got
development efforts under way to bring products to
market. We have other vehicles to get to market
quicker as well, which could include partnerships or
potential acquisitions, or so on. We always consider
time to market and a make versus buy analysis
together.
Q. Now I see that since you've taken over, the
stock has started to rise, with some of your key
announcements. It had been stuck for a while. What
do you attribute this to?
A. Well, we had a slow-down a year ago, and our
whole industry had a slow-down a year ago, and the
reasons our business slowed down is we're a little bit
different than some of the other customers in the
industry. Our Asian markets had slowed down a bit a
year ago for reasons related to the Asian financial
crisis. And we also had a bit of a slow-down a year
ago due to stalled sales cycles, stalled decisions on
what to do in the backbone. I think that a lot of
progress has been made since then, and it's showing
up in our financial results, and if you follow through
this past fiscal year that's just closed, we've continued
to show very strong sequential, quarter over quarter
growth in revenues and net income. And we're also, a
smaller number of companies in our industries that
continue to good year-over-year revenue growth are
now starting to show year-over-year net income
growth as well. So we've been, over the past year,
we've been quietly addressing the internal operations
of the company, transitioning to a company that's
much more market-driven, and we've made a number
of investments over the past year, calendar 1997, or
fiscal '98, our year ends in March. And we've asked
out investors to be patient with us, that we've made a
number of those investments, and we believe that
given the steady progress that we've made, and the
outlook for the company, and how we're positioned
right now given the product line that we have - we
don't have a lot of baggage in terms of product
transitions that we have to deal with right now. So
we're positioned pretty well, going forward, and it's
starting to show up in our financial results, which has
been a very good thing for the company. And given
some of the announcements we've had on new
products coming out, our next generation ATM
switch, some of the partnerships that we've
announced there are very good things, and I think it
really leaves a good opportunity for us to stand apart
a bit from a large part of the industry, in terms of our
ability to execute, our ability to address customers'
needs a bit differently than others in our industry
today. And that's our goal, is to not be the same as all
the other guys. We want to be able to provide
value-add to our customers. It's a little different than
what's traditionally offered in some of the other
networking suppliers. That's starting to creep into our
stock.
Q. So, when you say investments, what kind of
investments have you been making?
A. Investments in product development in terms of
our next generation products, there's been a significant
investment. And it's always been our edge. We talk
about transitioning from a technology company to a
market-driven company. We are going to continue to
invest in our R&D organization, and that is our edge
for our company. Our products are our edge, but we
need to promote them better. We need to market
them better both through our direct sales force and
our channels, in terms of giving them the right
collateral, and I'm sure we understand how to position
our products with our customers. But that's one
aspect, in terms of the marketing and sales
organization and the investment in that organization,
but also investments in new products. And we made
pretty significant investments in our infrastructure last
year. We doubled our manufacturing capacity, we
opened a manufacturing plant in Dublin, Ireland, last
year, June we went operational. And it also helps
lower our tax base. We just opened up a brand-new
campus facility here in Pittsburgh, 300,000 square
foot manufacturing headquarters and R&D facility
here, which really helps with productivity and morale,
and it's really very nice for customers. I spend a
significant amount of my time with customers, looking
at what their needs are, presenting the company's
strategy, and just getting to know them better, and
bringing our customers into Pittsburgh has been a
very, very good way to set up the impression to our
customers that we're a company that's built to last,
we're going to be around for a while. We've got the
strategy and the plan to do so, we've got the
infrastructure to do that. And we've also invested in
our communications infrastructure. We've
implementing a new accounting system, and have put
a big investment in our capacity plan, sales planning,
and manufacturing planning systems as well.
Q. Now, do you find it's harder to explain ATM to
people than it would be with the Ethernet?
A. Well, you know, it's interesting. A year ago, there
were, Gigabit Ethernet was less the promise of and
the answer all to the backbone, and created a bit of a
challenge for us to differentiate why we positioned
ATM in the backbone. For customers who knew
what they wanted, it wasn't as difficult. Customers
who weren't sure or weren't sure of many of the
issues related to Gigabit Ethernet created a slowdown
in sales cycle as I mentioned earlier. Today, from our
standpoint and to the extent that I've had with our
customers that are prospects or the current
customers, there seems to be a lot more awareness
about both ATM and Gigabit Ethernet, in terms of the
roles in the network, and I think it's pretty clear today
that Gigabit Ethernet will have a role in the network,
there will be more short distance connections between
a server and a switch, there are some wiring
infrastructure limitations, and distance limitations -
those are just some of the standard issues today. I
think a lot of customers understand those issues and
accept them for what they are. ATM, on the other
hand, in terms of the values that it brings to a
corporate backbone in particular, when customers are
talking about a lot of applications that are required to
run a network, ATM becomes much better
infrastructure to support many of the applications
today, and some of the applications that are planned
around these networks over time, including voice
applications and some of Web-based applications
that are coming out today, Web-enabled applications.
And again, if customers have a true three to five year
outlook on what they want to do with their
information technology and with the network
infrastructure, ATM is ideal to address all those
needs, and it scales to do that. Now, at the same
time, Gigabit Ethernet will have a role, and, like we
interface Fast Ethernet into ATM infrastructures
today, we will support Gigabit Ethernet, as it relates
to server connections, into an ATM backbone
infrastructure. We will have network modules on our
switches that support Gigabit Ethernet as well. So
we're part of the Gigabit Ethernet Alliance, we're
supporting the standards. And as the products mature
and the roles become more defined, we will support
what architecture that's part of an overall backbone
into an ATM backbone infrastructure itself.
Q. So, can you give me a feel for what sorts of
networks your newer customers are putting in,
customers that haven't had ATM?
A. There's a lot of really interesting vertical markets
that are starting to fill out around their own needs
within their industry, and our solutions happen to
address some of those needs and give those
customers a competitive advantage. And I think
traditionally we've done very well in education, we've
done very well in health-care, we've done very well in
entertainment, and a lot of these were, for various
reasons, specific to their industry. But today we're
actually broadening the vertical markets that we sell
into fairly aggressively. We're selling now to the airline
industry, the petrochemical industry, we've got a
broad list of customers there, public utilities, state and
local governments, the Federal government has
always been a big market for us, and many, many
Fortune 100 accounts are becoming a big part of our
customer base. And we're not just closing what I call
back door accounts, which is a departmental
workgroup or the backbone out on the edge of an
enhanced network, or something like that. We're
starting to close, and win, the entire corporate
network, which is more of an end-to-end type
offering from us, and that includes the corporate
backbone, which would be the LAN backbone, the
edge, out to the desktop and the wiring closet, as well
as the wide area network, as part of the overall
architecture. And as the LAN and the WAN start to
converge, ATM is a terrific platform to support that
convergence. And we spin that to our customers as
part of the architecture. And it's a very attractive
solution. And what we want to do - I guess we are
the only company to offer desktop ATM, LAN
backbone ATM, both our standard backbone
infrastructure and wide area products that are all
based on the same software, the same hardware
platform, the same ASICs and it scales all the way
through it, matter of fact it scales all the way into the
service provider infrastructure for the service
offerings, could be the same platform. But
nonetheless, in the enterprise, we're winning a larger
segment of the customer networks. And these are all
walks of life, many different industries, many different
vertical markets, and a much greater number of higher
profile accounts, marketing type of accounts, that
we're starting to close. Like Prudential Insurance, that
we announced recently, like Microsoft, like Shell Oil.
Q. What are you doing with Microsoft?
A. Microsoft, we are supplying their entire
headquarters campus with ATM backbone switches,
and we've been a part of their network for almost a
year, we're approaching a year here this summer.
Q. Their entire campus?
A. Their entire campus, yes. It's a fairly large and
expensive network. Microsoft is a strategic account, a
very important customer of ours. And we're really
delighted to have the opportunity to continue to work
with Microsoft and expand our offerings in the
network as well.
Q. One thing, I think, you're trying to say, and tell
me if I'm correct, is that you've differentiated yourself
by accepting the variety out there, and the need for
Ethernet and ATM to co-exist, and you're going to
provide a solution...
A. That's correct. And how we architect that
solution is a little different than some of the other
companies in our industry
Q. And how is that?
A. And I think that's where our difference is, and
that's where value-add is....
A. And we're talking about what's on the edge of the
corporate network. And the backbone infrastructure,
we position ATM as the core background, and with
other switch technologies feeding into the ATM
backbone, can be Fast Ethernet or Gigabit Ethernet.
We also interface very well with router backbones,
and routers interface very well into our ATM
technology.
Q. Now, have you achieved that interface so
seamlessly?
A. Well, it's evolved over time. I mean, if you think
of how Fore has grown as a company, every network
that we sell this to, there's an incumbent in the
network. And in our early days we interfaced very
well with the Cisco routers and Bay routers and large
networks. And these were, again, part of the
back-door accounts where we did a small portion of
the accounts. As customer needs are evolving today,
and as our product line is evolving today, we continue
to work really well with other industry pl ayers,
technologies, and their product lines, and interfacing
with the installed base that's out there today. And we
offer a terrific migration strategy for our customers to
evolve from their installed base equipment that they
have to higher capacity switching solutions, whether
on the edge or the backbone infrastructure. And our
architecture still incorporates routing, but not routers,
and essentially the routers that are in the network start
to move out to the edge of the network, and our
architecture still takes more of a distributed routing
design for our customer's network switches, which is
a bit more cost-effective and efficient and easier to
manage, to take some of the complexity out. And
that's a lot of the frustration we're hearing from
customers today, the networks and the installed base
of equipment that they have within their corporate
network is too complex to manage right now, and
they need to slice off complexity and cost to make
things a little a bit more easier. And they could devote
some of that cost they're saving and invest it in other
applications and run over the networks. So they can
keep their budget whole and then actually redirect the
funding to a more productive use. |
