Daily Archives: August 10, 2009

SAP Reportedly in Talks to Acquire Tibco

I’m not sure what to make of it, but a report originating in a German publication suggests that SAP is involved in “very advanced talks” to acquire middleware-messaging vendor Tibco.

Citing an anonymous source close to the discussions, German weekly Wirtschaftwoche reported the acquisition negotiations on Saturday.

Even before the German report surfaced, speculation about a potential SAP bid for Tibco could be found.

With its Tibco Silver offering, the reputed buyout target made a recent foray into the provision of software tools to write and manage programs for cloud computing on Amazon.com’s cloud platform.

Zafirovski Bolts for Nortel Exit

In announcing his resignation as Nortel’s CEO today, Mike Zafirovski brought an end to a reign that took the company under him from bad to worse, from severely compromised to having to submit to chronic palliative care and, finally, to corporate euthanasia.

Nortel now waits for its harvestable, marketable organs to be surgically removed so that its respirator can be switched off. Zafirovski doesn’t want to stick around for the company’s final labored breaths under bankruptcy protection. He’s off to find a new job as CEO somewhere else. His work at Nortel is done, as has been the work of so many Nortel employees euphemistically “let go” during what was a long goodbye.

In the statement announcing his resignation, Zafirovski (known affectionately and otherwise as Mike Z.) implicitly made the case that he was doomed from the start, condemned to lead a fatally damaged company amid a punishing economy on a halting march toward oblivion. Said the departing CEO:

“Although solid progress was made in many areas, at the end, the capital structure and legacy costs coupled with the economic downturn proved too difficult to surmount.”

The chairman of the Nortel board, Harry Pearce, also rushing breathlessly toward the exit, offered similar excuses in Zafirovski’s (and, by extension, his own) defense:

“Mike came to Nortel to transform the company. He made great progress on many fronts including addressing significant accounting and related legal issues; improving the quality of Nortel products and the company’s cost structure. His ambitious vision helped shift the economic center of the company from legacy to growth investments. It is unfortunate the transformation was derailed by the deteriorating economic climate and the company’s legacy cost structure. The operating improvements and strategic investments made during his tenure significantly contributed to the fact that Nortel’s businesses are so attractive to potential buyers today.”

But the fact is, many of those businesses would have been more attractive to buyers long before now. They are depreciating assets, and they have been in that category for some time.

If Zafirovski, his executive team, and the inept and out-of-touch Nortel board of directors had made hard choices earlier – about focusing their efforts, about where and how Nortel could best utilize its resources, about selling certain business units and keeping others – Nortel probably would have been able to reconstitute itself as a viable company. It would not have been as broad as the Nortel corporate hydra of recent years, but that very economy of focus would have given it a chance to survive.

When he took the job at Nortel back in 2005, Zafirovski presumably knew what he was getting into – after all, he’s a smart guy, as he’ll be the first to tell you – so why didn’t he focus the company on viable markets rather than keeping pieces – such as enterprise – that were doomed to fail?

Some of the many partnerships Nortel struck under Zafirovski were long on photo-opportunity showmanship and woefully short on business substance. An example was the unified-communications partnership Nortel struck with Microsoft. In the final analysis, that was a one-sided arrangement that gave Nortel a few high-profile press releases and little else besides.

Yes, the accounting scandals and economic hardship were tough challenges – and a lot of severe damage was done to Nortel by its previous leadership regimes, no question – but Zafirovski should not be excused from taking responsibility for what was done, and not done, under his watch at the company.

Meanwhile, Nortel announces further financial losses as customers defect, partnerships waver, and competitors pounce. These losses could indeed be worse, and that’s a testament to the residual quality of Nortel’s technologies and products.

As Zafirovski blithely waves goodbye, the disposition of Nortel’s assets continues unabated. As he told Reuters:

“Discussions are advancing. They’re promising and there’s a confidence that we should be able to get stalking-horse agreements for all parts of the business … before this quarter’s over.”

One can only wonder what might have been if Nortel had decided to sell, and keep, some of those businesses long before now.

Riverbed Rumors Seem Idle Talk

In recent weeks, speculation has surfaced about Riverbed Technology as both a potential acquirer and an acquisition target.

People and companies do strange things, so nothing is irrevocably off the table. Still, I don’t envision Riverbed being acquired in the near term.

Cisco, with which Riverbed competes fiercely in the WAN-optimization space, has been mentioned as a potential buyer. I just don’t see it, though.

Cisco appears to be holding its own in WAN optimization, and while it would like more breathing room between itself, Riverbed, and Blue Coat Systems — which, with its Packeteer products, is the other major player in that space — Cisco probably feels it has enough in-house expertise and marketing might to grow its share of that particular market.

Each of the three major vendors will tell you it leads in WAN optimization. Indeed, each attempts to slice and dice the market eclectically so that arrives at a self-fulfilled prophecy of segment leadership. As noted, it is an intensely competitive space, eminently conducive to marketing creativity.

One possibility that has been mentioned is that Riverbed might look to buy minor players in the segment to boost its account coverage and market share. It’s a possibility, I suppose, but I’m not sure the company will arrive at a risk-reward profile or cost-benefit analysis to justify such a move.

Riverbed already is digesting an acquisition, of Mazu Networks, and it also has new partnerships that require sustained care and feeding. It seems to have enough on its ambitious plate.

Assessing Cisco’s Rivals in Enterprise Networking

Network World’s Jim Duffy, who has been covering the networking industry for a long time, considers whether HP and 3Com can muster value propositions that will persuade customers to choose them over Cisco in enterprise networking.

In his article, Duffy speaks with customers, analysts, and the vendors themselves.

3Com would have us believe it is back in the enterprise-networking game, even though it has abandoned that market twice over its long and colorful existence. HP’s ProCuve networking business, which HP once (and for a long period of time) considered divesting, is definitely putting price and margin pressure on Cisco. Nonetheless, it doesn’t quite have the end-to-end capabilities, particular at the network core, that Cisco offers.

For enterprise customers, value is assessed according to various and varying criteria, and Duffy covers the spectrum of factors comprehensively. In some cases, Cisco – with its 70-percent market dominance – will continue to repel invaders. In other instances, though, there is room for cogent alternatives to be brought forward.

Competitors might not always be able to match Cisco in breadth and depth of offerings, but there are enough openings and niches to build a competitive base.

I just wonder whether 3Com is the equal of HP, much less Cisco. In fact, Juniper stands a better chance of holding the number-three spot in enterprise networking than does 3Com.

In my view, 3Com is on borrowed time. It has the H3C products it developed in China, but 3Com’s relationship with Huawai – remember, H3C was a joint venture, an acronym for Huawai 3Com—is practically defunct, and 3Com’s sales in China are plummeting as a result. I just don’t see how 3Com, with its sales declining in China and its inability to compensate for those losses elsewhere in the world, will be able to sustain a meaningful challenge.

When customers look into 3Com’s past, present, and murky future, HP will seem a more credible vendor, one with the commitment and resources to stay the course. My guess is that 3Com is looking to be acquired before it gets squeezed too hard by its sharply falling revenue in China and its inability to compensate for that decline in other geographies. 3Com is positioning itself at the enterprise table, but I don’t think it has any intention of playing out its hand.

HP is a more interesting story. I think HP will go head to head against Cisco throughout the enterprise, eventually right through to the core of the data center, where virtualization of servers, storage, and networks will become increasingly important. Unlike IBM, HP is and will remain a branded player in the enterprise-networking market. It will buy products and technologies to fill gaps – such as in core switching – and it will increasingly find enterprise customers willing to consider it as a full-fledged alternative to Cisco.

Cisco could use the competition, and HP appears ready for the fight.