Problems on Google’s WiFi Network in Mountain View

According to a report at LightReading, the Google-supported municipal WiFi network in Mountain View, Calif. is not performing to local expectations.

The network-coverage problems in Mountain View could affect plans for wireless municipal rollouts in larger cities, including San Francisco. Quoting from the LightReading piece:

The question of the coverage in Mountain View is a ticklish one for the search giant because Google has promoted the deployment as a high-powered showcase for its municipal networking technology (the infrastructure in Mountain View is supplied by Tropos Networks Inc. ). As other cities around the country experience unexpected hiccups in deploying WiFi networks, the dissatisfaction in Mountain View could give pause to officials and users in other towns looking at muni networks.

In other words, if Mountain View — an affluent, relatively small, and extremely tech-savvy community in the heart of Silicon Valley — can’t get decent service, how will less favored cities fare?

That question is particularly relevant for San Francisco, which is still in contract talks with Google and EarthLink for a widely publicized muni WiFi system.

"This," says Kimo Crossman, a leading critic of the Google-EarthLink proposal, "is why San Francisco should insist on a proof of concept before any contract is signed."

Despite New CEO, Webroot Faces Tough Challenge

Webroot Software announced today that Peter Watkins, executive vice president at McAfee, has assumed the role of CEO.

As reported by eWeek:

Watkins, who has been serving on Webroot’s board of directors since 2004, takes over the CEO role from current chief executive David Moll, who will remain on the Boulder, Colo., company’s board. Moll has filled the position of CEO at Webroot since 2002, and is considered one of the driving forces behind the company’s rise to the top of the anti-spyware sector.

Webroot’s anti-spyware software is under increasing attack from major rivals, including McAfee, Symantec, and Microsoft, which is integrating anti-spyware technology into its Vista operating system, slated to launch later this month.

Responding to stiffening competition from McAfee and Symantec in enterprise and consumer markets, Webroot formed a partnership with UK-based antivirus vendor Sophos that allows it to incorporate the latter’s AV software into a bundle to compete against the AV/anti-spyware packages offered by its larger adversaries. Meanwhile, as for Microsoft, Webroot is betting that enterprises in particular will be reluctant to entrust their security requirements to the Redmond giant.

Talking a big game, Watkins, Webroot’s new CEO, said the following:

The big boys have left huge gaping holes in the market for us to exploit, as customers don’t want the second- or third-most effective technologies, and we will continue to innovate, which is not Symantec and McAfee’s business. We’ve already moved beyond the anti-spyware niche with integrated, best-of-breed anti-virus [software], and our customer ranks are growing, not being displaced . . . .

. . .  .We have millions of users, continued investment, and a lot of momentum, which is what every startup strives for. There will be plenty of opportunity for us to grow our business as the larger players sit on the sidelines and allow us to innovate; the nature of the threats themselves will keep this a robust market for a number of players beyond those companies."

Jon Oltsik, an analyst at Enterprise Strategy Group, begs to differ:

Anti-spyware was a flash-in-the-pan market that’s now a feature. Unfortunately for Webroot, the other providers have more market share, more money and more resources; I think they’re fighting uphill battle for survival that gets steeper every day. Enterprise customers are looking for more desktop security features, fewer management consoles to look at and fewer vendors to deal with, and none of that is a good recipe for Webroot to succeed. . . .

. . . . Microsoft will take market share from everyone, and it will become a [three-horse race] between Microsoft, Symantec and McAfee. Everyone else loses except for some regional players like F-Secure [in Europe] and Trend Micro [in Asia].

It is difficult to argue with Oltsik’s logic. Microsoft will take share from everyone, and only resource-rich McAfee and Symantec will be able to survive the onslaught. Others will be niche players or be swept away.

That leaves Webroot in a precarious position. Even though it received a whopping $108 million in venture-capital funding early in 2005, Webroot appears overmatched by the likes of Microsoft, Symantec, and McAfee. Although Symantec is diversifying into other markets, it won’t just walk away from AV, anti-spyware, and other content-security markets. McAfee already has signaled its intention to stand and fight.

An IPO, long rumored for Webroot, seems unlikely at this point. I don’t think the company would get the valuation it wants. More likely is that Webroot will be acquired or will merge with an existing AV vendor. Even though its financial backers won’t see the return on investment they envisioned when they plunked down that $108 million, they’ll be pleased to escape without suffering a major loss.

Infoblox IPO Rumored for Early 2007

Sources say that Infoblox, vendor of network-identity appliances for protocols and services including DNS, DHCP, RADIUS, TFTP, and IPAM, is gearing up for an IPO in the early part of next year.

The exact timing of the public offering would be determined by market conditions, but all indications suggest that the company would like to make its move early in the year, if possible.

Palm Targeted by NTP in Patent Lawsuit

NTP Inc., the private patent-wielding firm that engaged in protracted litigation and angry taunts with Research in Motion (RIM), now has trained its litigious sights on Palm Inc.

Today NTP, which eventually obtained a $612.5-million settlement from RIM, filed a lawsuit against Palm, seeking injunctive relief to prevent the manufacturer of handheld devices and smartphones "from continuing to infringe on NTP’s patents directly and indirectly." NTP also is seeking unspecified monetary damages.

If Palm is wise, it will not follow the needlessly costly trail blazed by RIM, which had several opportunities to resolve the legal dispute with NPD for far less money than it ultimately paid.

Network World: Why Doesn’t HP Spin Off Its ProCurve Business?

Network World’s LAN Switching’s Burning Questions provide good commentary on provocative questions. The feature is worth following on a regular basis.

Earlier today, I referred to Network World’s musings about the relative costs of Cisco’s switches. Among the future questions to be examined by Network World are the following:

Why doesn’t HP spin off its ProCurve business?

How much can a LAN switch really protect your network?

Wasn’t Dell supposed to dominate the LAN market by now?

They’re all good questions, and I look forward to seeing how Network World handles them. As for the question about HP ProCurve, it had been rumored more than a year ago that Francisco Partners was on the cusp of buying HP’s networking business unit, but that the deal foundered on unsuccessful negotiations regarding the brand identity the acquired property would assume, as well as on other issues.

Now that HP ProCurve is getting plaudits from Gartner Group and its prospects for market-share gains in the enterprise seem to be improving, will HP decide to keep or sell the business? Let’s see whether Network World can shed some light on the current thinking inside HP.

The Analysts Aren’t Wrong About Check Point

Globes Online’s Shlomo Greenberg seems genuinely puzzled as to why Wall Street analysts and other market influencers do not see Check Point Software Technologies in a more favorable light.

He refers to Network World’s Richard Stiennon’s recent open letter to Check Point CEO Gil Shwed, which calls for big changes at the Internet-security company. The following excerpt gives you a taste of Stiennon’s larger argument, which includes recommendations that Check Point move its headquarters from Israel to the USA, put its software on appliances (perhaps through the acquisition of a hardware company), and focus and execute better on enterprise and carrier (hosted security services) opportunities:

I have been perplexed by Check Point’s actions, or rather lack of actions, for the last seven years. Do you not see that there are opportunities in network security that surpass the existing size of the market? Do you not understand that your current customers are less well protected from outside threats than they were when they first became your customers? Do you not see the warning signs when you lose your major accounts to competitors? Do you not watch the network security start up activity in Silicon Valley? Have you not noticed that Cisco is pulling off a marketing coup with its misbegotten Network Admission Control scheme?

However, instead of taking Stiennon’s criticisms seriously and rebutting them accordingly, Greenberg treats them as symptoms of "management-shareholder relations" problems at Check Point. He claims the management-shareholder relationships problems also are reflected in analysts’ concerns and questions about Check Point’s prospects.

Greenberg is wrong. Check Point has a performance problem, and it cannot be addressed by improved investor relations or by slicker public relations. For the most part, the market analysts and critics such as Stiennon are absolutely correct.

Check Point exhibits all the signs of a company that has no room for complacency. Overall revenue growth is slowing, software-license revenue is declining, channel conflicts are growing, and a coherent strategic direction is lacking.

No amount of spin doctoring will mask the numbers that Check Point has reported or will report in future quarters. Until those numbers improve, and until the company’s leadership can demonstrate that it has a firmer grip on reality, Check Point can expect its stock-market performance and real-world sales to go sideways.

Like IronPort, Barracuda Unlikely to Go Public Soon

IronPort is one of the leaders in high-end email security, but at the low end of the email-security space, Barracuda Networks long has held sway with its comparatively low-priced appliances.

Barracuda has expanded its product portfolio to include a web firewall and an instant-messaging firewall alongside the company’s original anti-spam appliance. Advertisements for its products are ubiquitous, accosting you not only on the Internet, but in the real world in places such as airports, roadside billboards, and on popular radio shows.

As speculation has mounted regarding IronPort’s IPO intentions, some observers have begun to wonder whether Barracuda will follow suit or perhaps try to beat its higher-end counterpart to the public market.

Sources tell us, though, that Barracuda isn’t in a hurry to go public. The company claims to have the sort of business metrics that would justify and sustain an IPO, according to those familiar with the situation, but it does not want to make the move until it’s a somewhat bigger player than it is today.

What about the threat posed by Microsoft at the low end of the market? Isn’t that a concern for the folks at Barracuda? We have heard Barracuda isn’t all that worried, though perhaps it should be.

Are Cisco Switches Overpriced?

Phil Hochmuth of Network World examines the eternal question of whether Cisco Systems’ switching gear is significantly more expensive than that of its competitors. The widespread industry assumption is that Cisco equipment is priced high, if not overpriced.

Hochmuth did some investigating and discovered the following:

But comparing overall LAN switch port prices — based on figures from Synergy Research Group — Cisco is not that much more costly than some of its high-performance competitors. On a price-per-port basis, it’s not even the most expensive. Force10 Networks, at $513 per port, is the priciest switch vendor; more than half of Force10’s revenue is from 10G Ethernet switch port sales. The second-most expensive switches per port are from Foundry at $162 per port. Cisco is third at $124 per port, followed by Extreme at $113. Enterasys, Alcatel and Nortel cost $89, $88 and $80 per port. The cheapest brands are Netgear ($4), D-Link ($5) and Cisco’s Linksys ($6).

Force10 probably should not have been included in the sample, since, as Hochmuth concedes, it derives a large share of its revenue from 10G Ethernet sales, which understandably cost more than 10/100/1000-Mbps switches. If you remove Force10 from consideration, Cisco is second only to Foundry on the price charts, and Foundry’s product mix is skewed toward high-end applications in the network backbone and data center.

When one takes those factors into analysis, it’s reasonable to wonder whether Cisco’s wiring-closet switches might be overpriced. As if reading our minds, Hochmuth notes the following:

While Cisco may be associated with high-end products and price, its lower-end gear is among the most expensive. If you’re in the market for a fixed-configuration box — usually a stackable wiring closet switch for connecting end users or maybe a rack of servers — Cisco is not your cheapest bet. The company had the highest per-port price for fixed-configuration switches (a superset of Layer 2 and 3, Fast, Gigabit and 10G speeds) at $73 per port. Extreme was second at $72 and Alcatel was third at $48.

However, Cisco is also hedging on the low end of the market, as its Linksys switch brand sold for around $7 per port — third-cheapest among the company’s tracked by Synergy Research Group.

So far, Cisco’s relatively higher prices haven’t severely constrained its market share. According to Yankee Group, whose Zeus Kerravala is quoted in the Network World piece, Cisco accounted for 55% of LAN switch port shipments in 2005, and none of Cisco’s large-enterprise switch competitors accounted for more than 5% of the market in terms of ports shipped.

Car-Navigation Company Acquires Traffic.com

Earlier today, I reflected on the eventual fallout of the inevitable bursting of the Web 2.0 bubble.

While we are in the midst of a mildly speculative Web 2.0 bubble, I surmised, the damage and wreckage it will cause will be nowhere near as severe as what was left behind by the original Internet implosion.

Some of the Web 1.0 companies remained with us and evolved, and a few even prospered. Amazon, Yahoo, and Google are prime examples, but several others managed to stay the course and remain relevant.

One of those was Traffic.com, founded back in 1998, which was acquired today for $179 million in cash and stock by Navteq Corp., purveyor of automobile-navigation systems.

It’s an acquisition that makes sense. Not only was Navteq already using Traffic.com’s customized traffic reports in its navigation systems, but clearly Traffic.com’s traffic-monitoring services have maximum value when they are provided on the dashboard display of a car rather than on separate devices on which a driver would be forced to fire up a web browser, presumably before he or she began a journey.

With more than 600 employees, Wayne, Pa-based Traffic.com serves 50 metropolitan areas throughout the U.S. and approximately 100 million drivers, of which 70 million are daily commuters. It had revenue of $453.3 million in fiscal 2005.

How’s Blue Coat Doing?

Blue Coat Systems is a possible turnaround story, and many eyes are focused on the company as it attempts to extricate itself from a stock-option backdating controversy while trying to lift revenue on the strength of relatively new offerings in WAN optimization and content security and control.

The company’s board of directors has yet to complete its investigation into BlueCoat’s past stock-option granting practices. That means, even though Blue Coat’s latest quarter closed at the end of October, we should not expect anything more than revenue to be reported by the company about two weeks from now.

Still, revenue growth will provide at least some indication as to how well the market is receiving the company’s new offerings. It also could potentially give us some insight into the extent to which revenue growth attributable to the company’s flagship web-caching/proxy products is weakening.

Blue Coat sought to aggressively promote and sell its WAN-optimization products this past quarter. A consensus view is emerging that, while Blue Coat has begun to make headway into its installed base with those products, it probably did not close enough WAN-optimization business in the just-ended quarter to appreciably lift its top-line number. In addition to having to address its own issues with field execution and the sales cycle, Blue Coat also is facing daunting competition, including red-hot WAN-optimization leader Riverbed Technology and networking behemoth Cisco Systems.

For that reason, I’m thinking that Blue Coat’s revenue in the October quarter will be on the low end of estimates, which range from $37.57 million to $38.23 million. It might even be a bit lighter than the $37.57 estimate.

As for when the stock-option backdating quagmire will be resolved, your guess is as good as mine. For all involved, let’s hope it gets sorted out sooner rather than later.

Cowen Analyst Says IBM Inconsistent in Services

Cowen & Co. analyst Louis R. Miscioscia said in a client note today that IBM has demonstrated "mixed performance" in its main segments for several quarters, including its services unit, the company’s primary revenue generator. He wants to see the services unit deliver more consistent results.

The analyst also said the company’s repositioning efforts, which focus on its services segment, have yet to deliver gains, and that IBM could face slowing growth in hardware and software sales.

He hit IBM with the euphemistic rating of "neutral," which is about as harsh an assessment as many analysts will deliver.

IBM went on a software-company buying binge this summer in an effort to give it more applications around which to wrap its professional-services offerings. Among IBM’s software acquisitions were enterprise-content management (ECM) vendor FileNet and security player ISS, bought for $1.6 billion and $1.3 billion, respectively.

Bursting of Web 2.0 Bubble Unlikely to Cause Damage on Web 1.0 Scale

CNET’s News.com provides an interesting feature article today as industry movers and shakers — along with many ambitious aspirants — prepare to get together at the third annual Web 2.0 Conference in San Francisco.

The article quotes a variety of industry players, including entrepreneurs, investors, and market observers. A consensus emerges that, yes, exuberance over Web 2.0 is forming a bubble-market mentality that will inevitably burst, but that the resulting damage won’t be on anywhere near the scale of the first Internet bubble.

While there are similarities between this bubble and the last one — too many companies and too much money chasing limited market opportunities, a surfeit of marketing exaggeration and hyperbole, recruiters’ irrational behavior, and so forth — there also are significant differences.

Many of the entrepreneurs involved with Web 2.0 went through the Internet boom and bust, and they learned from their experiences. The business model with many of today’s Web companies is more than an afterthought. What’s more, the costs involved with starting a company today are much less than the money required to get a company off the ground during the first boom.

As the News.com article notes:

New businesses today have access to free open-source software, relatively cheap hardware and powerful development tools. With more Web sites providing programmatic access to outsiders, developers can also build mashup applications that combine information from multiple Web sites.

Add it all up and the money and effort to launch a Web company has gone down substantially, compared to only a few years ago–a shift with implications for both entrepreneurs and their financial backers.

Naturally, this development is changing the investment philosophies of at least some venture capitalists, which are recognizing that earlier, smaller plays are required in the Web 2.0 world.

The question remains, though: How much of Web 2.0 is real and sustainable? I think some of those quoted in the article are right when they say the Web programming and technology innovation occurring today will prove beneficial and useful to enterprises and consumers well into the future.

Still, I also believe that most Web 2.0 companies are doomed, especially the expanding plethora of companies chasing consumer-oriented markets. A few winners have emerged already, such as YouTube and (for a while, at least) MySpace, but the ratio of winners-to-losers will not be compelling from an aggregate investment standpoint. Chasing the caprice of consumers, whose most valuable commodity is time, is always a dangerous game, as various youth-oriented social-networking sites are discovering.

As for Enterprise 2.0, practical innovations are accruing and more value will be delivered. Web-based applications, or software as a service (SaaS), are becoming more compelling and will gain further favor with businesses. Real money can be made here, and business metrics, such as cost savings and return on investment (ROI), can be applied. Salesforce.com and others have demonstrated that the market can be lucrative.

Even in the enterprise, though, opportunities are limited. Incumbents and other major players will see the opportunities and they’ll leverage their existing enterprise assets — as Microsoft, Oracle, and IBM are doing — to ensure that they get a piece of the action.

As always, investors in startups must focus on business fundamentals and market realities rather than be swept away by euphoria and hype. Many useful services and technologies will arise from Web 2.0, but only a few of the companies being born today will survive the tests of the market and of time.