Data communications board vendor Digi International Inc hit hard times at the beginning of this year, reporting a $2.6m net loss in the first quarter, with a class action quickly following (CI No 3,093, 3,103). The Minneapolis firm then announced it was to take a $10m restructuring charge and said it would be axing some […]
Data communications board vendor Digi International Inc hit hard times at the beginning of this year, reporting a $2.6m net loss in the first quarter, with a class action quickly following (CI No 3,093, 3,103). The Minneapolis firm then announced it was to take a $10m restructuring charge and said it would be axing some 23% of its staff. Jerry Dusa, Digi’s new president and chief executive officer, following the departure of Erv Kamm at the beginning of the year, is now busy trying to re-focus a business that appears to have stretched itself too thin. Digi began a spending spree back in 1991, when it agreed to buy one of its competitors, Arnet Inc. It followed that up by buying Star Gate Technologies Inc, LAN Access Inc and the Milan Technology Group. Most recently, Digi took a substantial $6.3m investment position in AetherWorks Corp, a development stage company currently working on symmetric modem modulation technology called V.Mach – and is committed to pay another $7.5m into the company, taking its stake to something like 63%. AetherWorks aside, Digi is now retreating back to its core businesses of multiport access and server-based remote access systems. But there’s a difference: its once buoyant Unix business, which still accounts for some 40% of its sales, is fading, and in its place, says Jerry Dusa, Windows NT is moving like a runaway freight train. NT is already generating a further 40% of Digi’s sales, with Novell Inc Netware accounting for the other 20%.
Server-based remote access
Partly that’s in line with the obvious market trends, but it also reflects Digi’s move away from the traditional Unix and multi- user fixed port business it and its competitors – such as Chase, Comtrol, Equinox, Specialix and Stallion – have previously concentrated on, towards what analysts IDC Corp are calling server-based remote access communications, involving multiport asynchronous and ISDN boards that go into Novell NetWare, Microsoft NT Server and other server platforms to create remote access servers based on standard, and cheap, personal computer- based servers. IDC is forecasting a 1997 port shipment growth of 45% in this sector, around 3.3 million ports growing to 5.4 million ports by the year 2000. IDC gives Digi a 51% share of this market, with Equinox is nearest competitor on 12%. Revenues are still higher in the traditional market, but the high-growth rates of server-based remote access systems are only likely to be further stimulated by rumors that Microsoft is looking to add wide area routing support to Windows NT through its unannounced Steelhead project, taking on the proprietary standalone router businesses currently dominated by the likes of Cisco Systems Inc and 3Com Corp.