In today's world of end-to-end networking, size does matter - as the relatively small Newbridge Networks has found. The company tried to fight it out with the big boys and now finds itself on the ropes and up for sale.
Pim Bilderbeek, analyst at IDC, said that Newbridge is trying to compete in the end-to-end networking market against companies - like Nortel and Lucent - that are far bigger and offer a total networking package to enterprise customers.
"Newbridge has got a good product line," said Bilderbeek, "but it's too small to compete in the networking world now. It's up against multibillion dollar companies."
He added that at the enterprise-level suppliers need cast-iron credibility and tight links with telcos, and Newbridge's connections have not proved good enough. The company has given the impression of not controlling its own destiny, with the resignation of president Alan Lutz last month and six profit warnings in 10 quarters.
Not all the problems are internal however. Lucent has been a thorn in Newbridge's side with its victory in a patent infringement court case last month. Lucent won $9.59 million in the law suit, which it had filed in June 1997. A US jury found that Newbridge had intentionally infringed four Lucent patents. The legal decision is a further blow to Newbridge, although it said that it would present a new defence to the judge in a bid to get the decision overturned.
Before the verdict was announced, Newbridge executive VP for EMEA, Andreas Dohmen, told Network News that Newbridge had hit problems in the US and Canada, taking on too many people at its headquarters and not getting "the right product to the right customer at the right time." In contrast, Dohmen said, the European market, where Newbridge does up to 40 per cent of its global turnover, has been going well.
The short-term response from Newbridge is a restructuring that axes around 10 per cent of its 7000-strong workforce - with most of the cuts likely at the Canadian headquarters. There are also likely to be job losses in Europe (which has around 1300 staff, including 700 in the UK). Newbridge is outsourcing its support operation, probably to IBM, and is also outsourcing its volume manufacturing.
The company is adamant that customers will not be affected by the outsourcing of support. Newbridge has been actively visiting large client sites to reassure them.
Looking to the future, Newbridge is hoping that its high-speed 50Gbps IP-ready ATM switch, due to ship in December or January, will change its fortunes.
But what of the future?
But in the long-term can Newbridge survive as a separate company? It has appointed a bank to consider all options, which would include a sale - and its flagship ATM technology would make it attractive to one of the large telecoms companies that lacked ATM switching of its own.
According to analysts, Ericsson, Alcatel, Siemens or Nokia would be the most plausible buyers. Neil Rickard at Gartner Group pointed out that Newbridge could align itself with a smaller, tier-two vendor.
Rickard was critical of the general strategy that Newbridge has implemented. "Newbridge has pursued the enterprise market for far too long," he said. "Over the last three years at least it has become apparent that enterprise customers want an end-to-end solution - Newbridge has never been able to offer that."
He argued that Newbridge should have left the enterprise market to the giants - Cisco, Nortel and Lucent - and instead focused its efforts on supplying ATM switches to carriers. "The opportunity was there for Newbridge to become a niche supplier to the carrier market. It did not take it."
Analysts agree that the question is not will Newbridge be sold, but when will it be sold. "It's the only way for them to really address their problems," said Bilderbeek.
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