The market for ethernet edge products has been a cut throat business for sometime and the recent price war in the network interface card market primarily between Intel Corp and 3Com Corp has claimed its first victim. In a move that will more than halve the size of the company, Microdyne Corp is to quit the networking products business altogether despite the unit generating more than half of its revenues. According to Michael Jalbert, president and ceo at the company since March, We thought we had found the bottom of the market in March but, in fact, the adapter cards business has deteriorated even further during the current quarter. In February, in an attempt to keep up with its bigger rivals Microdyne cut prices on a wide range of products, including Ethernet and Fast Ethernet adapter cards, hubs, and switches with reductions ranging from 7.5% to 30.3%. But the move failed to turn around the company’s performance. According to Jalbert, despite these attempts to achieve sustainable profitability in an extremely volatile market, the Networking Products Division has continued to incur substantial losses over the past eighteen months. Microdyne says it is looking to sell off the unit, which manufactures workgroup ethernet and fast ethernet products as well as SAA and Token Ring adapters, but it is also willing to sell of the product lines individually. In the four quarters ending March 31 1997, Microdyne reported revenues of $80.8m of which $45.1m was from its Networking Products Division. Now, says Jalbert, the company will focus on its two remaining units: the Aerospace Telemetry Division which develops and manufactures receivers for aerospace and satellite communications. and Microdyne Support Services which offers outsource support services. Just three months ago the company restructured its Networking Products Division, writing down goodwill and inventory previously valued at $27m. It also announced a shipping holiday in its fourth quarter, in order to draw inventories down to a target level of 30 days. Despite both the remaining divisions turning in growth and profits during the last financial year, Microdyne reported losses of $2.944m for the year ending September 30, 1996. The Networking Products Division is now a discontinued operation and the company will record a charge of $5m and $8m in its third quarter to cover expected losses and closing costs. According to the company it is in talks with several companies regarding the sale of the unit and the Jalbert was in discussions concerning the possible sale of the entire unit with several West Coast companies all day yesterday.
