Monthly Archives: July 2009

Dissolution of Soapstone Networks

It’s all over but the shouting for Soapstone Networks, formerly Avici Systems.

The company officially filed its certificate of dissolution today, and, yes, that’s as definitive as it sounds.

Avici began life with theoretical promise as a core-router vendor, an alternative to Cisco and Juniper for carrier customers. The company never had more than a handful of customers, though, and when it lost its biggest customer (AT&T/SBC), its fate was sealed.

With the grimmest of reapers in hot pursuit, Avici reinvented itself as Soapstone Networks, a vendor of carrier Ethernet solutions that few could conceptually grasp, much less buy.

It wasn’t long before employees were being shed and Morgan Stanley was hired as an investment-banking agent to identify “strategic options.” When a buyer could not be found, the company reached the end of the road and officially filed for dissolution.

Sadly, it’s a familiar story. Soapstone, nee Avici, is not alone in the networking graveyard.

Watchguard to Announce BorderWare Acquisition

A deal that has been sealed for a few weeks will be announced imminently when Watchguard discloses that it has acquired the assets of email-security specialist BorderWare Technologies.

Channel hearsay suggests a deal between the two firms could be announced early next week, according to a report on Channelweb.co.uk.

What RIM Wants: The LTE Patents Ericsson Didn’t Get

Observers continue to puzzle over RIM’s motivation in the ongoing Nortel saga. Why, people ask, has RIM enlisted the Canadian government in a bid to thwart or otherwise complicate Ericsson’s pending acquisition of Nortel’s wireless business unit in a court-sponsored auction?

As I’ve said previously, RIM would like to get its hands on Nortel’s LTE patents. I have no doubt about it.

What’s interesting is that Nortel’s LTE patents were not included in the pending sale of its wireless assets to Ericsson. If that deal goes through, the Swedish telecommunications manufacturer will get CDMA and LTE products and technologies, but it will not gain ownership of Nortel’s LTE patents.

As Nortel lawyer Derrick Tay has said, Nortel isn’t transferring any of its LTE patents under the planned sale of wireless assets to Ericsson. Nortel will license the appropriate LTE patents to Ericsson as part of the planned deal, but Nortel still owns the LTE patents and a sale process relating to those properties has yet to be determined.

Nortel has more than 5,500 patents, of which 600 — mainly relating to CDMA — are being transferred to Ericsson under the proposed deal.

So, Nortel has sold its wireless business unit, but its LTE patents remain potentially in play. Nortel supposedly wants to keep them, recasting itself as a “patent troll,” stocked with more lawyers than engineers. RIM, of course, would like to acquire them, presuming Nortel is willing or forced to put them on the auction block.

I could be wrong, but I think RIM has involved the Canadian government – and invoked a concerted propaganda campaign – to compel Nortel to offer the patents, many of which were devised and developed in Canadian research laboratories, for sale to a Canadian buyer. The argument would be that such valuable intellectual property, at least some of which was financed by Canadian taxpayers, should remain in the country, where the work can continue under the auspices of a real company (RIM) – you know, one with actual engineers — rather than a corporate shell manned by fast-taking lawyers and green-visored accountants.

How will it turn out? Stay tuned.

iSuppli Reports Moderate Sequential Growth in Handset Shipments

Now is apparently the time for market-research companies to churn out their latest mobile-handset data, with iSuppli joining the deluge in reporting its latest numbers.

It says there was sequential (from the first quarter to the second) growth of nearly 5 percent in the second quarter, the first quarter-on-quarter growth in nine months. (It is important to recognize that this data does not conflict with year-to-year declines in quarterly unit shipments reported by Strategy Analytics and IDC.)

Said iSuppli analyst Tina Teng:

“The moderate increase indicates the worldwide mobile handset market is bottoming out and now is returning to growth.”

For 2009 on the whole, however, the research firm says unit shipments will shrink 9.9 percent (relative to 2008) to 1.1 billion units. That would be the first annual decline in eight years.

Looking to the immediate future, iSuppli foresees an improving second half, with quarter-on-quarter sequential unit-shipment increases of 6 percent in the third quarter and 8.3 percent in the fourth quarter.

We’ll see, though. Nearly everybody seems cautiously optimistic at the moment, but a setback in reported consumer or business spending could occasion downward revisions by market trackers in subsequent months.

IDC and Strategy Analytics Note Handset Declines

On the heels of my post regarding sharply declining sales by the world’s five leading handset vendors in the second quarter of 2009, I note that Wireless Week ran a story on new market-research reports by Strategy Analytics and IDC, both of which suggest that second-quarter global handset shipments were indeed down, but not as prostrate as in previous quarters.

That’s what passes for good news these days.

Strategy Analytics says global handset shipments reached 273 million units in the second quarter, a decrease of 8 percent compared to shipments in the same quarter last year. For its part, IDC reported that handset vendors shipped a total of 269.6 million units worldwide, down 10.8 percent from 302.2 million units in the second quarter a year ago.

As for market share, IDC paints a picture similar to the one depicted by Mobile Entertainment. IDC estimates that Nokia held a 38.3 percent global market share in the second quarter, followed by Samsung with 19.4 percent, LG with 11.1 percent, and Motorola with 5.5 percent. Sony Ericsson accounted for 5.1 percent share, and “others” totaled 20.7 percent. Those “others” usually get a sizeable chunk.

In its market outlook, IDC sees consumer demand for high-end handsets. Apple is feasting in the high-end smartphone category, with Strategy Analytics estimating that the Cupertino, Calif.-based vendor shipped 5.2 million iPhones worldwide in the second quarter.

Handset Sales Down Sharply in Q2

The folks at Mobile Entertainment have crunched some market data and concluded that unit sales by the world’s five top handset vendors were down sharply in the second quarter of 2009.

Handset sales by Nokia, Samsung, LG, Motorola, and Sony Ericsson totaled 213.9 million units, down from 247.9 million handsets sold in the same quarter last year. That’s a year-to-year drop of 13.7 percent.

Some vendors suffered more than others, with the South Korean manufacturers taking market share from their rivals. Nokia, which remains the overall market leader, saw its shipments decline 15.4 percent on a year-to-year basis. The biggest gainer was Samsung, which saw it handset sales grow 14.4 percent relative to the corresponding quarter last year.

The company that fell off the map was Motorola, whose shipments plummeted 47.3 percent. Sony Ericsson was nearly as wretched, with unit sales dropping 43.4 percent.

With sales 103.2 million phones in the quarter, Nokia retained a clear lead over runner-up Samsung, which sold about 52.3 million handsets. LG breezed past Motorola to become the number-three vendor.

Symantec and McAfee: One is Going the Wrong Way

In comparing and contrasting their latest quarterly results and earnings forecasts, we find McAfee and Symantec on divergent paths.

McAfee, the smaller of the two security-software stalwarts, is on the better path, going from relative strength to strength and gaining market share on Symantec in enterprise markets, small- and medium-business accounts, and the consumer space.

This isn’t a new development. McAfee has been getting its act together for a while now, whereas Symantec cannot seem to recover from its ill-advised acquisition of Veritas back in 2005. The legacy that former Symantec CEO John Thompason left behind has been more albatross than soaring eagle.

Current Symantec CEO Enrique Salem, who’s been in the security industry a great many years in a number of high-profile roles, probably wishes he could have a do-over. Unfortunately for him, he and his executive team will have to find a way to get an unfocused, unwieldy, and fractious company back on track. He’ll require a large measure of good fortune as well as skill and diplomacy.

The wheels seem to be falling off at Symantec, and the problems cannot all be blamed on a moribund macroeconomy. McAfee is not experiencing the same degree of pain that Symantec is suffering. In every market where the two companies compete head to head, McAfee is getting the better of its larger rival.

Symantec’s losses in enterprise and small- and medium-size businesses (SMBs) are especially troubling. That’s where the company, with its product portfolio, should compete effectively, where it soup-to-nuts security offerings should be packaged and sold as end-to-end solutions. But it’s not happening, and Symantec is failing to get customers to sign long-term licensing deals. Again, McAfee is having more success on that front.

Nobody, especially investors, likes to see one-year deals instead of three-year pacts, and Symantec has a lot of them. When these are reviewed a year from now, they might not be renewed. They could go elsewhere. That customers are willing to make only tentative commitments should concern all Symantec stakeholders. The revenue declines the company has been experiencing have been bad, but they could get worse.

Meanwhile, though Symantec has improved its consumer offerings, that’s not a market for the faint of heart. Freeware and “cheapware” — from a host of vendors, including Microsoft, which finally is owning up to its security obligators to consumers — are thinning already pressured margins. So, even though the consumer space is an area where the company’s fortune are ebbing less distressingly than elsewhere, that situation is likely to worsen with time.

Has Symantec entered desperate times?

You know what they say about desperate times. They call for desperate measures. At some point, perhaps sooner rather than later, Salem might give serious consideration to throwing off the distracting boat anchor of Veritas and the detritus it has accumulated since that dubious acquisition.

Looking Back at Liberate Technologies

One of the most popular posts on this site is “The Strange Story of Liberate Technologies.” It was written on September 28, 2006, and it attracted two cryptic comments. Lots of people have read it.

I am mystified as to why it has enjoyed such enduring appeal. I don’t think the only readers are former employees of the company, though some undoubtedly were, as those enigmatic comments attest.

Perhaps the story of Liberate, though strange, is the story of many technology companies in the post-2000 era of diminished expectations.

Once high-flying startups pumped up on seemingly limitless venture-capital funding eventually met hard times, investor demands for revenue and profit, and an IPO market that melted faster than an ice cube in a hot tub. Carnage resulted. Hopes were dashed, dreams died, jobs were lost, companies were liquidated or sold for a song.

Liberate wasn’t the only technology concern to meet an untimely and ignominious end, though it almost certainly was practically alone in attempting to reanimate itself as a trucking company.

Catching Up: F5 Beats the Street — Again

I suspect that F5 Networks continues to take away market share from its rivals in application-traffic management, so it’s probably not advisable to assume that the company’s encouraging third-quarter results, announced last week, are harbingers of better and brighter days for enterprise-related IT spending.

Still, it is a positive development, especially for F5 and its shareholders.

I’ve always admired the way the company operates. It’s one of the few networking firms that took on Cisco in a significant market segment and more than held its own in the battle.

All through the load-balancing wars of the Internet era, and then again into the current period where the market identifiers and nomenclature have changed (application-traffic management begat application networking, which begat application-delivery networking) — reflecting both the evolution of marketing buzzwords and new technological developments — F5 has demonstrated unswerving focus and uncommon resilience.

It’s still a strong company, with a deep management team, solid products, and an effective sales channel. Not surprisingly, the company is looking forward to posting robust fourth-quarter results.

IBM’s Acquisitions: Big One Makes News, Small One Points to Further Moves

IBM today announced two acquisitions. The larger one, IBM’s all-cash offer to buy predictive-analytics mainstay SPPS for $1.2 billion ($50 per share), drew the bulk of media attention, as it should.

The offer price represented a 42-percent premium to SPSS’s Monday closing price, and the company’s shares rallied today to close the gap.

However, the smaller acquisition might signal another big IBM move in a different market sector. In tandem with its SPSS acquisition announcement, IBM said it has purchased privately held Ounce Labs for an undisclosed amount.

Ounce Labs provides security and compliance software that scans source code of applications, hunting for security holes and compliance failures. In doing so, the software helps companies identify and solve code-related compliance and security problems early, resulting in lower costs, less risk, and fewer worries.

As CNET’s Lance Whitney reports, IBM will integrate Waltham, Mass.-based Ounce Labs into its Rational software business, which offers security and compliance testing. When the integration is complete, IBM believes the combination of the two companies will enable its customers to enjoy security analysis from source code to deployment.

Both organically and through acquisitions, IBM is constructing an increasingly credible security portfolio. It would not be a surprise to see IBM make a bigger security buy in the near future.

The History and Mystery of RIM’s Nortel Cage Rattling

As the Ottawa Citizen’s James Bagnall recounts in an article today, RIM has seemed more a provocateur than an earnest prospective buyer of Nortel’s wireless business unit.

For the reasons Bagnall adduces, I don’t think there’s any way RIM can persuade the Canadian government to reverse or otherwise challenge Ericsson’s more than $1.1-billion acquisition of Nortel’s wireless assets. Odds overwhelmingly favor that deal going through, notwithstanding RIM’s belated and obstreperous objections.

However, as I mentioned in my previous post, RIM’s real objective isn’t to have that decision overturned. RIM is applying pressure to the Canadian government to get what it really wants: Nortel’s LTE patents.

The ruse just might work, too. This drama will play itself out soon enough, and it will be interesting to observe.

What About Nortel’s Metro-Ethernet BU?

As Nortel gradually divests itself of its business units, one we haven’t heard much about is Metro Ethernet Networks (MEN) operation.

The early line had the MEN business unit going for as much as $750 million. That still might happen, but I’m skeptical, even doubtful.

As time ticks ever forward — it doesn’t go backward, as far as we know — Nortel’s MEN unit is a depreciating asset, one that doesn’t benefit from being awash in uncertainty. When a company has signaled its intent to sell off its operational business units, customers tend to be wary about making further investments in its products and services, understandably concerned about the ultimate disposition of the company and the future plans of its new ownership.

That’s why I think there’s an inverse relationship between the time it takes to arrange a sale of the MEN business unit and the amount of compensation Nortel eventually will get for it. The longer it takes to line somebody up, the lower the price Nortel will receive.

Compounding the problem for Nortel is that a couple potential bidders seem to have eliminated themselves from contention.

Ericsson, now that it seemingly has bagged Nortel’s wireless business unit — barring a belated intervention or reversal by the Canadian federal government — has signaled, at least for now, that it has no interest in other Nortel assets. Ericsson was considered a favorite to claim Nortel’s MEN unit.

Tellabs also has pulled out of the running. It was considered a potential acquirer of the MEN business.

The companies still seemingly in the MEN bidding derby, in descending order of probable serious intent, are Ciena, Sycamore, Juniper, and Alcatel-Lucent,

I can’t envision Cisco or Huawei getting involved, for very different reasons. Cisco probably has little or no interest, whereas Huawei, even if it had interest, would probably never get through the approvals process.

At this point, though, nothing much seems to be happening. That can’t be a good omen for Nortel’s creditors.