Monthly Archives: June 2009

Radware Changes Americas Leadership Again

Radware, a vendor of application switches, has announced that Ramesh Barasia will take over as its president of the Americas.

As noted at Morningstar, Radware tends to depose its Americas leadership every couple years, so Mr. Barasia might just be the latest in a long line of executives who fail to achieve market prominence for Radware products in those still-key markets.

That said, Morningstar takes a guardedly optimistic stance, noting that Radware has high hopes for the Alteon unit it acquired from the increasingly distressed, and nearly completely defunct, Nortel Networks. Radware optimists also cite the relative resilience and robustness of the application-switch marketplace, led by the likes of F5, Cisco, and Citrix.

Radware has been relatively strong in its technology, but comparatively weak in marketing and sales execution in the Americas. A pioneer in what was called the load-balancing marketplace, Radware has lost ground commercially and arguably technologically to F5 Networks over the years.

Radware is banking heavily on tapping the installed base of chronically neglected Alteon to break into Nortel enterprise and carrier accounts. The problem is, the Alteon installed base was defecting long before Radware took over, and the customer exodus appears nearly complete. Radware could be picking at bones rather than enjoying a succulent feast.

Yes, Radware has new leadership in the Americas, but we’ve seen that movie before. The challenge for Radware and Ramesh Barasia is to demonstrate that they can capitalize commercially on the Alteon acquisition.

Time will tell, starting with the company’s forthcoming quarterly results.

Apple’s Steve Jobs Problem

Apple has a problem with Steve Jobs.

The problem isn’t that investors, legal scholars, and company shareholders are charging that the company might have run afoul of securities regulations by not disclosing more about the severity of Steve Jobs’ medical condition, which climaxed in his having a liver transplant at a hospital in Memphis, Tennessee.

That, in and of itself, is a problem, but it’s not the big one.

Just to address the first issue, though — regarding how much Apple was legally required to divulge about Jobs’ imperiled health — opinions diverge. The upshot seems to be that public companies are not legally responsible to divulge private details of an executive’s health; but they are required to disclose “material” facts, which would comprise information and knowledge that investors would require before making a stock-related investment decision.

So, the argument can be reduced to the following question, as articulated by the AmLaw Daily blog:

Is Apple’s stature so dependent on Jobs that his health is, in effect, a material fact? Also at issue is whether the company knowingly played down the seriousness of Jobs’ health problems even though officials knew better, according to experts interviewed by the LAT (LA Times).

There is much dispute on this point, all of which leads to Apple’s primary Steve Jobs problem.

Simply put, the legend and mystique of Steve Jobs, once such an invaluable marketing asset to the company, now threatens at least a significant measure of its continued prosperity.

The business press often is guilty of what might be called “the great man syndrome.” Rather than focusing on complex factors — shifting market dynamics, technological advances and dislocations, functional or dysfunctional boards, and corporate cultures and processes — business journalists like to focus on the leader, the man or woman at the top of a company’s corporate hierarchy. In their coverage, reporters tend to give the CEO too much credit for a company’s successes and too much blame for its failures.

In Apple’s steady and seemingly inexorable ascent, Jobs seems to have gotten far too much credit for the company’s achievements, to the point where his legend has become practically impregnable and unassailable. To be fair, it wasn’t his doing. Apple’s public-relations and marketing mavens, shrewdly perceiving the business’ press weakness for the “great man” angle, played up Jobs for all he was worth in media adulation and effusive praise.

Now, though, the drawback of the “great man” strategy is coming back to haunt Apple.

To Apple’s credit, it is seeking, ever so gradually, to change the narrative. It is pointing out that others, including Chief Operating Officer Tim Cook, have picked up the slack in Jobs’ absence. Apple is emphasizing that Cook and others at the company are more than capable of keeping the company pointed in the right direction and moving forward, technologically and commercially. After years of putting Jobs front and centre as the guru at the core of its mythology, Apple is now emphasizing the company’s executive bench strength.

That’s absolutely necessary, and it’s something Apple’s must continue to do. At long last, Apple must portray itself as a successful, publicly listed technology company, not a cult of personality.

In companies, especially public ones, nobody is or should be irreplaceable. The show at Apple must go on, with or without Steve Jobs.

Motorola Appears Destined to Remain Also-Ran in Smartphone Derby

I cannot argue with TheStreet.com’s Scott Moritz’s grim prognosis for Motorola in the smartphone marketplace.

Apple and RIM are well entrenched as players at the high end of the market, with the Palm Pre making a quixotic bid for mindshare and market share. Meanwhile, the midrange of the market is crowded with largely undifferentiated players, many of which are adopting Google’s Android as their operating system.

Unfortunately for Motorola, that’s where it finds itself.

F5 Target of Recurring Acquisition Rumors

F5 Networks will announce financial results for its fiscal third quarter after market trading concludes Wednesday, July 22.

Having held its own against Cisco Systems in the load balancing and application-traffic management markets, F5 has established market leadership in what are now called application-delivery controllers (ADCs), in a space now classified as application-delivery networking (ADN).

Given F5’s market successes against the likes of Cisco and Citrix, it should come as no surprise that it is regularly the subject of takeover speculation. Such speculation has intensified of late, with IBM and Cisco frequently cited as potential acquirers.

IBM is probably the more likely of the two to make a bid for F5, but that doesn’t mean it will happen. F5 has been independent for a long time, defying many previous takeover rumors, and chances are it will continue to chart its own course.

Other companies might be interested in buying F5, but that doesn’t mean F5 is interested in being bought.

Questioning the 3Com Hype

Shares of 3Com have risen appreciably this year on the strength of aggressive product rollouts, a few prominent customer wins, and the opportunity for some other vendor to wrest some of Cisco’s prodigious market share in enterprise networking.

On January 2, as the interactive chart at Yahoo Finance illustrates, you could buy a 3Com share for $2.38. As of June 9, 3Com shares hit a 2009 high point of $5.16 before retreating somewhat to close yesterday at $4.72. No matter how you slice it, 3Com shares have had a very good year so far.

Market analysts have begun paying attention to the company again. Today, for instance, we can see divergent interpretations of 3Com’s business prospects from Bernstein Research analyst Jeff Evenson and Needham analyst Greg Mesniaeff.

Mesniaeff is the optimist. He says:

“Like the legendary Woody Hayes, 3Com is moving forward with an all-out assault on the global enterprise networking market from its base in China, and it appears its take-no-prisoners approach is working.”

Given his emphatic assessment, it probably will not come as a surprise to learn that Mesniaeff has initiated 3Com coverage with a “buy” recommendation. He sets a price target of $7.

Meanwhile, Bernstein’s Jeff Evenson is heading in the other direction, cutting his rating on the stock to “market perform” from “outperform.” He has increased his price target to $5 from $4, which seems prudent given that shares are trading much closer to the later than the former.

Evenson concludes that 3Com’s shares are fairly valued. However, he also warns that 3Com’s sales to Huawei — its former partner in China-based H3C and a would-be, minority-share acquirer of 3Com itself — could decrease 30%-50% over the next year. In support of that forecast, he reports that Huawei is moving away from selling 3Com-H3C switches to its Chinese customers.

As Evenson suggests, 3Com must devise an effective strategy to compensate for revenue losses related to Huawei’s gradual estrangement from H3C as a supplier.

I think it’s a foregone conclusion that 3Com, through its H3C unit, will steadily lose business to Huawei and others in China. Without Huawei, 3Com will lose access to many valuable Chinese accounts. At the same time, Huawei is looking to build its own product portfolio instead of relying on 3Com, to which it no longer has a meaningful, long-term commitment.

3Com is trying to grow elsewhere, getting back into the enterprise-networking space against Cisco in North America, EMEA, and other global markets. The challenge for 3Com is its past — it has abandoned the enterprise space before, and customers who were burned by the experience are not inclined to leap into the flames again — and the present.

With regard to the here and now, 3Com is not alone in having pretensions to enterprise-networking glory. Other contenders looking to take away market share from Cisco include HP (ProCurve), Juniper, and the bankrupt Nortel Networks, with smaller players also looking to get a piece of the action.

3Com, despite some effective PR in the past few months, has quite a hill to climb global enterprise networking, which is where it must continually gain ground if it is to meet the lofty expectations that Needham analyst Greg Mesniaeff has set for it.

With date-center virtualization taking hold — and Cisco and HP strongly positioning themselves as one-stop shops for servers, storage, and networking gear — 3Com might find itself at a competitive disadvantage in many large accounts. 3Com has a relatively extensive line of networking products, but it doesn’t have enterprise servers or storage.

I’m skeptical of 3Com’s ability to take on Cisco and HP. It might gain some share if it is determined and perseveres in restoring its tarnished image as an enterprise-networking purveyor in North America and Europe, but I think the gains will be limited by 3Com’s stature and sales channels.

The wild card in this picture is IBM, which sells servers and storage, but doesn’t have a horse in the networking race. 3Com tried to sell itself before, and it’s not unreasonable to think it could be on the block again. If IBM is shopping for a networking vendor with an extensive product portfolio, 3Com definitely could be an acquisition candidate.

Then again, IBM is getting closer to Juniper, which could leave 3Com with no place at the market-consolidation table when the music eventually stops.

Microsoft: Nearly 50% of PC Users Don’t Run AV Software

In a PC Advisor UK story that also has been published on the InfoWorld website, we learn that Microsoft is preparing to make available free anti-virus software online.

This move has been a long time coming, but it’s still significant. If Microsoft does a good job with the software, code-named Morro, anti-virus software vendors such as Symantec, McAfee, and Trend Micro, among others, could suffer losses in market share and revenue relating to their not-free products and services.

In making the case that it must offer free anti-virus software, Microsoft cites increasing PC adoption in developing markets such as China, India, and Brazil, where fewer PCs are protected by anti-malware software and therefore are more exposed to online security threats.

Incredibly (at least to this observer), Microsoft says that a large percentage of PCs users do not have anti-virus software running on their systems. To wit:

The company said at the time that Morro would help encourage more people to take anti-virus seriously, claiming nearly 50 percent of Windows users don’t have an anti-virus tool installed on their PC.

That’s a shockingly high percentage of unprotected Windows users. I realize AV isn’t the cure to the world’s online ills, but it’s a modest security precaution that all PC users should be willing to make.

I’m all for free anti-virus software. I think Microsoft should have protected its users from abuse right from the outset of the networked-PC era.

As the vendor of a hugely popular operating system, Microsoft has an ethical obligation to protect its customers from abuses that exploit inherent vulnerabilities and weaknesses of its product.

Microsoft to Europeans: No Browser for You!

The long-running battle of wills between European Union regulators and Microsoft executives has reached, at long last, an absurd climax.

Sure, the situation has been skewing toward absurdity for a while, but surely it is steaming toward Lunacy Station now.

It’s gotten to the point where Microsoft, under antitrust pressure from the EU not to bundle a paid-for product with a free offering, has chosen not to provide a browser with its Windows 7 offering system in Europe this fall.

It’s not clear how consumers that buy Windows 7 will obtain a browser — presumably through FTP — but this approach to solving the bundling issue seems to indicate that both parties need to rethink the entire matter.

When European bureaucrats first took antitrust aim at Microsoft back in the 90s — before the Internet bubble burst, never mind the current financial-inspired downturn — Microsoft arguably was a colossus bestriding the globe.

Now? Well, not so much.

Microsoft has legitimate competition nearly everywhere it turns, including in the browser space, where its primary rivals are the Mozilla Foundation (Firefox), Google, Apple, and scores of ankle biters. Its browser market share has been ebbing gradually for a few years, and consumers know how to use one browser to download a competing browser from the web. Competition is alive and well, and Microsoft has learned to live with that reality.

It’s now time for the EU bureaucrats to make their peace with reality. Let Microsoft bundle the browser with Windows 7. European citizens are smart enough to decide whether they want to keep using Internet Explorer or download another browser.