Daily Archives: July 6, 2006

Cisco Buys Meetinghouse to Bolster NAC Credentials

Addressing a gap in its Network Admission Control (NAC) initiative, Cisco Systems announced a definitive agreement to acquire Porstmouth, NH-based Meetinghouse Data Communications, Inc. for $43.7 million in cash.

Meetinghouse specializes in 802.1x security software that enables enterprises to restrict network access to authorized users and devices spanning wired and wireless networks. The transaction is expected to close in Cisco’s fiscal first quarter, which ends Oct. 28, by which time Meetinghouse’s products and 77 employees will be subsumed within Cisco’s wireless networking business unit (WNBU).

Cisco is attempting to make its NAC architecture easier to deploy and manage across a broad array of networks, devices, and operating systems. Until now, Cisco lacked wireless support in its Cisco Trust Agent. Cisco’s NAC is just one of several competing architectural offerings in the hotly contested network access control (NAC) marketplace, which remains in its early days, long on architectural blueprints and short on full-fledged solutions. Along with Cisco, companies battling for network-access-control dominance include Microsoft, Juniper, McAfee, and several other players, including several venture-funded startups.

Unlike the startups, Cisco has the industry experience, large installed base of customers, and whopping war chest to quickly identify deficiencies in its its product portfolio and rectify them through acquisitions like this one.

Open Text Tops Symphony with $483.5-million Hummingbird Bid

As founder, chairman, and former CEO of content-management software firm Hummingbird Ltd., Fred Sorkin was savaged by investors and market analysts when he announced in May that he had agreed to sell his company to California-based Symphony Technology Group for US$465 million in cash ($26.75 per share). Even though the company’s stock price had stagnated for nearly four years, shareholders and analysts derided the 12-percent premium inherent in the Symphony proposal. In their view, the company, which retains considerable market presence, was worth at least $30 per share.

Well, they’re not getting $30 per share, but shareholders do have an offer to consider that is better than what was proposed by Symphony. Yesterday, Open Text — a content-management competitor to Hummingbird located not far from the latter’s Toronto headquarters — proposed to buy Hummingbird for $483.5 million in cash, or $27.75 a share, a dollar more than Symphony’s contentious proposal.

The market collectively thinks another counteroffer might be forthcoming. As of this afternoon, the company’s shares were trading at $28.50, representing a market capitalization of approximately $496 million. The assumption is that Sorkin, who personally choreographed and endorsed the initial offer, might be able to persuade Symphony to top the proposal brought forward by Hummingbird.

There’s a good chance the market, in its allegedly infinite and invisible wisdom, will prove correct. Although Sorkin indicated that the company’s board would be open to a competing offer, he also has argued that the Symphony deal was a good one because disruption to Hummingbird’s operations and product portfolio would have been minimal, whereas an acquisition by a competitor would be more likely to result in extensive restructuring and layoffs. On the other hand, some observers claim Sorkin’s motives are far from altruistic, that clauses and provisions in the original proposal from Symphony were extremely favorable to Sorkin personally. Last but perhaps not least, there’s the matter of a 2.5-percent breakup fee agreed between Hummingbird and Symphony, which means the California concern could walk away with $12 million for having its lawyers work on the paperwork for a thwarted deal.

For its part, Open Text says it has commitments from the owners of 18 percent of Hummingbird’s stock to tender their shares unless a better offer materializes, with owners of another 18 percent of shares indicating they will support a better offer. Hummingbird is in play, and all indications suggest that Open Text’s offer, to be formally submitted July 15, will not be the last to surface.

Report: Microsoft’s “iPod Killer” Slated for Holiday-Season Release

Long rumored, Microsoft’s alleged “iPod killer” will reach store shelves in time for the holiday season, according to entertainment-industry executives cited by the New York Times.

Microsoft’s portable music and video player apparently will look similar to some devices already based on its software from Samsung, Sony, and Creative Technology, but it will feature wireless connectivity — let’s hope it’s WiFi and not the proprietary, extravagantly priced wireless bandwidth purveyed by wireless operators — and a sharper video screen. Microsoft also reportedly is negotiating with major record companies and television networks on terms that would allow it to sell music and video content online through a service similar to Apple’s iTunes Music Store.

A few years ago, it would have been statistical folly to bet against Microsoft’s ultimate success in a new market. Now, it’s an even-money wagering proposition; Microsoft is no longer a “sure thing” in any market. Distracted and defocused by its own internal politics and a changing of the executive guard along mahogany row, Microsoft seems to be navigating a desultory course in a strategic miasma. It talks a big game about competing with Google in search and online application services. It also seems to want to be a major player in unified communications and VoIP services, for enterprises and for consumers. Let’s not forget about its console-gaming franchise with the XBox, and its existing operating-system, its Office personal-productivity application suite, and its forays into business applications for SMEs. It’s also working on grid computing, and in a host of other areas too numerous to mention.

Does it all hold together, cohesively if not coherently? I’m not sure. The grand strategy is not clear to me.

As for the “iPod killer,” I think Microsoft is picking a fight it cannot win. I can see why they’re doing it — its braintrust thought hardware licensees of the mobile variant of Windows could more than take the battle to Apple, but that never happened — that they fervently believe a successful Windows-based device is integral to driving traffic to an online music and video store on a resuscitated MSN portal. What’s more, Microsoft doubtless believes that Apple’s increasingly strained business relations with record companies and television networks represents a weakness than can be exploited.

What Microsoft is forgetting, however, is that the iPod has been a huge success with consumers. Alternatives to the iPod are on the market, and alternatives to iTunes also are available, and people overwhelmingly have voted with their wallets in Apple’s favor. That isn’t to say that Microsoft won’t capture a minority share of the market; such an outcome is probable. However, since when has Microsoft been in the business of finishing as an also-ran in any market, functioning merely as a competitive foil and a negotiating prop between a market leader and its content suppliers? That’s a comedown for the great Microsoft, like like a formerly fearsome heavyweight boxer struggling through 10 rounds against a club fighter.

Maybe Microsoft should have reached a different conclusion when its hardware partners failed to make a serious dent in Apple’s iPod franchise. Perhaps Microsoft should have concluded that the market had been defined and won by Apple, rather than that vertical integration of Microsoft hardware and software would make all the difference to the market outcome.

When Microsoft hatched the XBox, it knew that online console gaming was still up for grabs and that there was no other feasible way to get into the market other than building the boxes itself. It made sense for Microsoft to follow the course it devised. This time, though, Microsoft appears to have drawn the wrong conclusions. At the end of the “iPod killer” road, I suspect Microsoft will be left with minority market share and a lot of broken relationships with former hardware partners. Will it all have been worth it?

Despite Rumor, F5 Networks Unlikely to be Acquired

It’s summer, when the living is easy and rumors make the rounds.

One rumor that began circulating yesterday is that F5 Networks, the market leader in networking gear for secure application delivery and optimization, is about to be acquired. Undoubtedly, several players — including Cisco Systems, Juniper Networks, and private-equity firms with wheelbarrows full of money — would consider acquiring F5 for a reasonable premium above its current market capitalization of about $2.2 billion. In the past, however, F5 has steadfastly resisted takeover overtures, and I don’t think anything has changed to make the company more receptive to acquisition bids now.

Plenty Happening Today, Reports to Come

Well, today is offering a cornucopia of activity and events worthy of commentary. I have consulting engagements to which I must attend this morning, however, so look for my posts later today. Thanks for your patience.