When a network equipment vendor gets bought out or reorganizes its business, it’s supposed to be a bad sign for that vendor’s customers. A new owner or new business structure often heralds the demise of less-successful product lines and changes in support contracts. Fortunately, the three vendor change stories in this issue – Alcatel’s purchase of Newbridge, Lucent’s creation of an enterprise line of business and Cabletron’s split into four business units – can all be viewed positively by the various firm’s clients.
Newbridge had been struggling ever since its unsuccessful purchase of UB Networks in early 1997. UB was supposed to give Newbridge a foot into the enterprise IP space. Instead it proved to be an albatross. Newbridge was never able to successfully integrate UB’s technology and the US$96 million Newbridge sank into its purchase of UB essentially vanished into thin air. Industry analysts never seemed to regain confidence in Newbridge and the firm’s share price and fortunes wallowed in mediocrity, while other networking players such as Nortel and Cisco saw their share prices and revenues climb meteorically.
Alcatel’s US$7.1 billion acquisition of Newbridge should be beneficial for both firms. Alcatel gets Newbridge’s 23 per cent ATM market share, while Newbridge gets a deep-pocketed new owner with a broad portfolio of networking gear and experience. What’s more, Alcatel’s other recent purchases of Packet Engines and Xylan prove the France-based telco equipment supplier is serious about making waves in the North American market.
Although Lucent posted disappointing results in its most recent quarter, the telco giant wasn’t anywhere close to being in the same straits as Newbridge. In the traditional voice networking equipment arena, Lucent is still a leader. It also has a solid portfolio of carrier-class data networking products thanks to its acquisition of Ascend early last year. But in the enterprise data networking category, Lucent has languished, despite having a range of products picked up largely through acquisitions.
One complaint heard from Lucent enterprise customers was that the firm paid too much attention to its very valuable carrier customers and not enough to its smaller enterprise clients. Now that Lucent has a division dedicated to enterprise sales, that should change. The only down side to Lucent’s decision to spin off an enterprise division is that the new company will not have a full range of LAN/WAN products. This shortfall though, should be more than made up for by the added attention the new unit will be able to lavish on enterprise customers.
Finally, in the case of Cabletron, any change is probably a good change. Cabletron spent most of the 1990s as one of the “big four” networking vendors, but its fortunes began flagging in recent years.
Cabletron has always had a name for good service and solid products. Its problem was a lack of solid channel partners to help push the firm’s wares. Now that the company is splitting into four operating units, it may be able to bring more focus to selling and supporting its premiere products – namely the SmartSwitch Router and Spectrum network management platform.
Too often in this industry, organizational change is perceived as a negative. While this is often justifiable, in the three aforementioned cases change should help Newbridge, Lucent and Cabletron refocus their efforts and bring better service and products to their customers.