Fluke-Agilent deal dies a quick death

A merger that a mere six weeks ago looked as impressive as the Titanic leaving port has met the same fate as the doomed ocean liner.

A deal that would have seen Fluke Networks, a spinoff from Fluke Corp. that manufactures handheld network testing, diagnostic and installation tools, buy Agilent Technologies Inc.’s NetMetrix division, whose products offer Remote Monitoring and RMON II capabilities, was first announced Oct. 4. At that time, NetMetrix general manager Anita Manwani trumpeted the deal as one that would give Fluke customers a broader set of products that would go beyond troubleshooting and diagnostics,” and one that would also carry NetMetrix’s installed base “forward in network technology.”

So what went wrong?

According to Paul Bugala, an analyst with International Data Corp. in Framingham, Mass., the biggest impediment to the deal’s success was the fact that it would have left Fluke Networks with a product line that was much too hardware-heavy.

“[Such a line] is harder and harder to sell in a market that’s growing more and more distributed and based on Web-based management and a software-based model.”

Fluke Networks’ line of handheld devices lets network technicians plug in and view the network from any location. The devices can also be left connected at certain locations to collect data on the network, which can then be accessed via a Web browser.

Bugala said that network analysis tools have recently grown from their roots as protocol analysers and sniffer products. As the Internet and e-commerce have blossomed, he said, the accompanying demand for uptime and availability has led to performance management becoming more important.

“And the platform for achieving that has been the network operation centre, where distributed and software-enabled products are the trump card,” he said.

A lack of emphasis on what is hot in the market would not have made either company appear as the up-and-coming entity they are hoping to be perceived as, Bugala added.

“You don’t enter the same river twice, in that if Fluke Networks was going to spin off from Fluke and become this aggressive and innovative company and come to the market with this very hardware-heavy value proposition, it wouldn’t have been indicative of what has been successful in the network management market of late,” said Bugala.

The deal would have given Agilent, which was spun off from Hewlett-Packard, an undisclosed amount of cash and Fluke Networks stock. Fluke Networks would have acquired the NetMetrix division, including its managers, 100 employees, key technologies, intellectual property and products, by the end of last month. Fluke was “excited to get the engineers and sales staff that made NetMetrix successful,” company president Chris Odell said when the deal was first announced.

Julie Kuntz, a spokesperson for Everett, Wash.-based Fluke Networks, said that strategically, nothing has changed for the company.

“We still see the performance management space that NetMetrix occupies is still very much a strategic market for us, and we will continue to pursue finding the right solutions in that and other markets,” she said.

Kuntz added that the company “would have loved” to have concluded the deal.

“We are sort of a nominal player in that market now and this would have quickly put us more at critical mass.” She explained critical mass to mean “having more mindshare and more customers in that performance management space….We are broadening the products that work as fixed tools, like these RMON probes.”

While merger reneges are never the most encouraging signs to customers, Bugala maintained that the installed bases of these companies should not be too discouraged by the reversal.

“It is encouraging to see that [Fluke and Agilent] showed a certain level of forbearance in light of what was developing into not the best coupling,” he said.

It was nevertheless imperative, he added, that Fluke make a well-thought-out move in the near future to restore any customer confidence that the bungled NetMetrix deal may have eroded.

“I would imagine that it will be imperative for Fluke Networks to counter-punch and come out with a very clear product strategy that is an answer to ‘Why didn’t you merge with NetMetrix?’ I would look at that as being forthcoming and maybe being a little more inclusive in terms of a software and hardware strategy.”