The changing of the guard at beleaguered Cabletron Systems in early June may have finally set the stage for a changing of hands.
When co-founder and current Cabletron CEO Craig Benson gave way to Piyush Patel, former CEO of YAGO Systems, the move was characterized by the corporation as a breath of fresh air and an injection of new blood. But the move has the appearance of clearing the decks for new ownership to step in.
That Cabletron is a potential acquisition target is certainly no surprise. Rumours that the company is ripe for acquisition have been rampant for at least a year and the likelihood of such an eventuality has risen proportionately to Cabletron’s sinking fortunes.
But ownership change seemed an unlikely possibility as long as Benson remained in the top post. It had apparently been tried and failed. You might recall the rumour that Nortel, before acquiring Bay Networks, had it in mind to buy Cabletron, but speculation was that Benson spearheaded opposition to such a deal.
Now that he joins co-founder, good buddy and former company CEO Bob Levine, stubborn Cabletron resistance to a sale may have disappeared.
With the flurry of strategic moves made in the network equipment industry over the past year, including the Lucent purchase of Ascend Communications and the Alcatel acquisition of Xylan, there aren’t too many takers for the likes of Cabletron these days. But German telecom and electronic components giant Siemens AG is certainly one possible suitor and would be the closest thing to a perfect fit for Cabletron at the moment.
By a strange coincidence, the strengths of each company seem to address the weaknesses of the other. Siemens is a highly successful European voice networking equipment maker that sorely lacks a comprehensive enterprise product portfolio, has no penetration into business datacom accounts and virtually no presence in the networking business in North America. Cabletron is a non-factor in the carrier space, has no history in voice equipment provisioning and does the bulk of its business in North America.
Put both companies together and you may have a potential powerhouse that could jump squarely into the middle of the IP convergence fray currently being duked out by Nortel, Cisco and Lucent.
As an added bonus, Cabletron also brings Spectrum, a highly successful and revered network management environment that is quickly scaling up to enterprise manager status. However, the inclusion of Spectrum in any Cabletron purchase could make the deal too rich, so a deal may only involve the hardware division. Yet another industry rumour has reported that Cabletron recently received a multibillion-dollar offer for Spectrum alone.
Culturally, both Siemens and Cabletron have much in common. Each has built a reputation based on excellent technological engineering, stellar customer services forged through a high-touch direct model, and both companies strongly adhere to an unwavering corporate conviction that their offerings are second to none, quality-wise. Substance matters a whole lot more than style to this pair.
A fly in the ointment may be Siemens’s long-standing partnership with 3Com Corp. Many industry observers believe 3Com has been a coveted acquisition for the German giant. But even though an eventual merger seemed the likely culmination of this closely partnered duo, the fit between Siemens and Cabletron is better.
Consider that 3Com has no presence in the carrier space and is a fast-fading player in the enterprise networking arena. In fact, 3Com brand identity these days seems more tied to the PalmPilot and other peripheral gear than to its switching equipment.
Another attractive element to a Siemens/Cabletron merger/acquisition is the fact that, through an existing joint product marketing partnership, Cabletron knows a whole lot about Nortel.
Cabletron is a great technology company with a loyal and extremely satisfied legion of users. However, the New Hampshire-based networking pioneer has fallen to a second tier of equipment makers who can only watch helplessly as other much larger competitors continue to gain ground and move out of sight.
Provisioning network gear is a different game from the feeds and speeds message sale that Cabletron and others used to play. Tomorrow’s successful network equipment providers are those who have it all — a complete end-to-end portfolio of carrier and enterprise products, strong international presence, ample resources and a solution to fit every need.
Now that the corporate decks have been cleared, Cabletron with the assistance of a voice networking juggernaut such as Siemens may be ready to catch up to the rest of the leading pack.