Ethernet notched up another victory against Token Ring this week in the increasingly one sided battle between the two local area networking technologies.
Token Ring specialist vendor Madge Networks on Wednesday reported a huge loss for its most recent financial quarter. Madge said the results were mostly affected by changes in its supply chain, but conceded that Token Ring sales had declined.
Analysts say while there is still demand for Token Ring products, the market is flat and vendors like Madge should expand their portfolios into faster growing areas - such as Ethernet.
Madge, based in Amsterdam, reported a loss of $8.5 million for the three months ended 31 March, 1999, compared with a net profit of $2.8 million during the year earlier period. The slump is a blow for the company, which last year appeared to be strengthening its performance.
Revenue for the quarter slumped to $48.8 million, compared with $65.8 million a year earlier.
Madge reported sales in its Token Ring business down by $2 million compared to the previous quarter. Madge said it reduced its channel inventories and revenue by around $6 million by improving its supply chain efficiency.
?We see shipments in Token Ring as flat, although switches are growing,? said Pim Bilderbeek, director at IDC?s Lan and remote access expertise centre. ?If Madge wanted to grow fast it shouldn?t be in Token Ring.?
Demand for new Token Ring products is likely to continue because so many people are already using it, said Bilderbeek. However, customers are more likely to use Token Ring and ATM or Token Ring and Ethernet, he said. They could also migrate to Ethernet.
?The thing that?s holding most people back is having a lot of installed Token Ring at the desktop,? he said. ?If you have 2,000 desktops on Token Ring, you?re not going to switch to Ethernet.?
Madge is hoping IP services will be the fast growing area that regenerates its business. Its new managed network business unit reported revenue of $5 million during the quarter.
?We are targeting a fast growing segment of the IP services industry, have established a solid infrastructure and have entered this market quickly,? said Madge?s chief executive Robert Madge. ?Although we are taking a cautious view of the short term growth of our product business, we look forward to the opportunities the IP market will provide.?
Competitor in the Token Ring market, Olicom, recently announced it would begin selling Fast Ethernet products. see Newswire 10 March
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