With its definitive agreement to pay around $100m to acquire Token Ring switching specialist Nashoba Networks Inc (CI No. 2,972), Cisco Systems Inc has effectively ended its relationship with Madge Networks Inc, although the company will continue to sell those co-developed products already on the market. Specifically, Cisco will pay between 1,55m and 2.3m shares […]
With its definitive agreement to pay around $100m to acquire Token Ring switching specialist Nashoba Networks Inc (CI No. 2,972), Cisco Systems Inc has effectively ended its relationship with Madge Networks Inc, although the company will continue to sell those co-developed products already on the market. Specifically, Cisco will pay between 1,55m and 2.3m shares for Nashoba. A spokesman for Cisco said that the appeal of privately-held Nashoba is its engineering expertise, as well as its product line: Nashoba markets the Concord Token Ring switch, as well as the Acton Token Ring Switch Media Center, which is designed to overcome compatability problems between users’ existing cable infrastructures and the available ports on a Token Ring switch. Talks between the companies started on the basis of a partnership, and subsequently evolved into acquisition discussions. Nashoba’s 40 or so employees will move from Littleton, Massachusetts to Cisco’s InterWorks Business Unit, down the road in Chelmsford. Some rationalization of Cisco’s existing Token Ring switching kit seems inevitable as a result of the acquisition – although Cisco is denying this. Nashoba’s Concord product, which is to be renamed the Catalyst 1800, comes with eight ports, expandable to 16, and is pitched for the backbone market. As such, it seems to compete head-on with Cisco’s Catalyst 1600, which comes with eight ports as standard, expandable to 12. Both provide FDDI uplink ports. A spokesman for Cisco said, however, that there are no immediate plans to phase out the 1600 and that the products will be marketed side by side. The 1600 is sourced from from Madge Networks, which sells it as the RingSwitch, as part of Madge’s long-term relationship with Cisco, and the Nashoba acquisition also seems to have put an end to that. Madge is one of two Token Ring relationships that Cisco has with other companies, the other being Olicom A/S. While the Olicom deal centers on low-end Media Access Control technology, and should therefore be unaffected by the Nashoba deal, the relationship with Madge overlaps much more with the technologies that Cisco will be acquiring through Nashoba. John Armstrong, director of product marketing for Madge, acknowledges the overlap, and says that as a result we don’t expect that sales of the RingSwitch [to Cisco] will continue to be a big revenue earner. He claims, however, not to be surprised about the deal – although Madge was not informed in advance – since he sees it as an indication that the Token Ring switching market has now entered the mainstream, so that Cisco reached a point where they determined that they didn’t want to be an OEM player, they wanted to be a player themselves. While Armstrong would not reveal how much the Cisco deal has been worth to Madge in the past, he says that the company is not worried that it might be coming to an end since we were a very different company when we entered the relationship with Cisco. In particular, he points to the fact that the deal was signed prior to Madge’s acquisition of Lannet Data Communications Ltd, and also when the Token Ring switch market was still in its infancy.