Bay Networks launched a new price-cutting strategy yesterday, as it fought off renewed rumours it is to become the subject of a takeover.
Bay's new strategy is designed to undercut rivals Intel and 3Com in the switching market. It introduced two new switches, the BayStack Autosense 350T and 350F, which Bay claims undercut rivals offerings in price and performance. Shipping this week, the 10/100Mbps 350T provides 16 dual 10/100 ports for #3,195, or #199 per port. The 350F, with 12 10/100Mbps ports and two 100Mbps fibre ports, will ship in June priced at #3,995, or #249 per port.
"Bay lost out to 3Com in the 10Mbps switching market," admitted Paul Trowbridge, analyst at Bay Networks UK. "But now we are taking the fight to them by leapfrogging 10Mbps to 100Mbps."
However, Alison Taylor, an analyst at Dataquest, believes the strategy is "misguided". "Bay could have made the price higher and still been successful," she said. "This is not a good strategy because the company must avoid being seen as a lower-end vendor."
Meanwhile, Compaq has been identified as a possible buyer for the network company, whose market share and stock price have been in decline for over a year. Both Bay and Compaq refused to comment.
"Compaq has probably looked at Bay," said Dataquest's Taylor, "but I suspect that Bay does not want to be bought at this time." She said the company was now concentrating on trying to turn itself around. "Compaq has made no secret of the fact that it wants to buy a major network company and it is looking seriously at the top players: Cisco, 3Com and Bay Networks," Taylor said.
However, she added that if Bay's share price falls much further, the company may have no choice but to accept a takeover bid. "The shareholders won't stand for it, and the company will be forced to sell."
Given the current wave of consolidation in the networking market, it would not be surprising if Bay Networks were to be snapped up soon. However, Compaq's natural partner in this market might have been 3Com, with its closer links to the desktop. But after the US Robotics merger, that door seems to have been slammed shut.
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