Dan McLean: Enterasys still trying to forge non-Cabletron identity

Does a sensible second choice to Cisco gear exist in today’s world of high-end enterprise communications infrastructure equipment? The folks at Enterasys Networks would like you to think so and to consider them as the number two network company that’s trying harder.

Who are Enterasys? You may remember the company some years back as Cabletron Systems, the so-called “bad boys from New Hampshire” who specialized in the highest of high-performance network gear and trashiest of trash talk when it came to dissin’ the competition.

Today’s reincarnated Enterasys, a kinder and gentler reincarnate, wants to be that primary alternate choice and is hoping a focus on price performance to comparable Cisco switching products will sway at least some of the enterprise masses.

Interestingly, time was when Cabletron and Cisco were industry peers from a revenue and customer mindshare standpoint and doubly ironic that today Enterasys works hard to play down the former outlaw image and seeks to quietly emerge a distant second to Cisco in the enterprise network equipment market. Times have changed in the IT industry.

Based on discussion at a recent Enterasys industry analyst event held near Boston, blazing a trail to second-place market leadership means focusing on price and technology performance, strengthening customer relationships, capitalizing on what the company considers to be a broad product offering and utilizing a strong direct and indirect selling approach. It’s a pretty good plan if it can be executed.

More importantly, even if Enterasys can achieve these desires, it may not be enough to compel a significant portion of the Canadian market to forsake the “safe buy” of Cisco.

Price and technology performance, from an Enterasys perspective, means offering rich feature function in the form of increased per-port performance, at a cost less than Cisco offerings. It’s the old more for less rule. Product-wise, Enterasys will focus on advanced Layer 3 switching, WLAN technology, core routing and regional WAN routing.

Like most of its peers in the high-end enterprise domain, Enterasys isn’t interested in the multi-billion-dollar low-end, shared network product space, seeing this as a much too commoditized volume selling market where little value can be added. So Intel, 3Com, Linksys, SMC and others need have no fear of Enterasys.

Enterasys, instead, believes core value centres squarely on security function and built-in equipment intelligence that provides management capability without the need for an overarching network management framework environment. In fact, this last point explains why Enterasys quietly sold off in August 2002 its Spectrum enterprise management software solution and folded the Aprisma business, believing such environments have no place in the networked world where everything connected sports inherent management smarts that simply needs to be activated.

Enterasys also knows that security is a red-hot concern and if, as a buyer, I can seriously address IT security AND enhance my network communications infrastructure through a single product, then I’m definitely intrigued. And, given the revered legacy of Cabletron equipment as high-performance and rock solid reliable, there’s credibility in the company’s story.

But whether Enterasys likes to admit it or not (and the company doesn’t), perceived uncertainty abounds and remains a daunting obstacle. The past year was difficult, with the U.S. Security Exchange Commission investigation, prompted by a sour deal in Asia. However, the official end to that nightmare investigation was announced in late February, which allowed Enterasys to move forward on the financial reporting front, whereby it was proudly announced that break-even status was achieved at year-end December 2002.

But there’s a whole lot of legacy baggage to purge. Start with disarray at the top, where a revolving door to the CEO’s offices was installed in 1997 when founder and bodybuilder extraordinaire Bob Levine called it quits. In the five years since Levine, there have been no less than five CEOs at Cabletron/Enterasys, four of whom have quietly disappeared.

Current top exec William O’Brien was brought on as a problem solver last year and tasked with righting the listing Enterasys ship that was foundering under the weight of the SEC investigation and in a sea of red ink. O’Brien was declared a more permanent CEO late last year, but the 58-year-old former managing partner at PricewaterhouseCoopers was collared out of retirement to assume the Enterasys helm, so would it be so surprising to see him return to a more leisurely life if the Enterasys storm ever settles – or sooner?

Everything old seems new at Enterasys. O’Brien, during a presentation at the January analyst event, was passionate in distancing the new Enterasys from the old Cabletron. Said O’Brien: “We have to start looking out the front window…We’re not the ‘bad boys of New Hampshire…We’re not going to be that way anymore.”

But in identifying the company’s key challenges moving forward – provide demand generation, be “professionally aggressive,” establish strong reseller partnerships, achieve greater success beyond the U.S. – it is clear this is the same list of priorities established since the days of Bob Levine. In fact, in castigating his under-performing account reps – “We need to get people accountable for delivering results.…We got rid of people who were delivering 30 per cent of quota.…If you can’t do the job, we’ll find someone who can” – O’Brien seemed to take a page from the Levine book of sales force management.

So what becomes of Enterasys, a company that is but a third of its former size of eight years ago, continues to tackle the same problems and issues, and, from a business perspective, can’t seem to stop behaving like Cabletron?

Are they number two and trying harder? We shall see.

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Jim Love, Chief Content Officer, IT World Canada

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