The dust has barely settled on Newbridge Network Inc’s acquisition of UB Networks (CI No 3,085) and the Canadian wide area networking supplier has already started to can some of the acquired UBN products. The first to go will be the GeoSwitch/155 ATM switch, which will be phased out and replaced by Newbridge’s VIVID ATM switch product line. TheGeoSwitch/155 ceased shipping last month. The number of users affected by the decision to ditch GeoSwitch/155 is relatively small – in total around 80 sites, the switch has only been on the market for around nine months. The affected installed base is, nonetheless, significant and includes a good many large corporates. Keith Thomas, the company’s IT consultant told us: ‘We have invested roughly $352,000 in UBN’s GeoSwitch ATM hubs for our ATM local area network which we use to back up large CAD files’. Thomas says Newbridge has offered to swap out hubs and replace them free of charge with the equivalent Newbridge ATM equipment. Alternatively, Newbridge has pledged to offer all users a full refund on all GeoSwitch/155s purchases if they choose to decommission them. For customers that do decide to take the Newbridge ATM alternative the migration is a relatively simple affair involving the swapping out of UBN network adapter cards for Newbridge’s Yellow Ridge range of adapter cards within the hub. Newbridge will try to migrate users of the GeoLAN/500 platform, an ATM hub which links legacy Ethernet/Fast Ethernet and Token Ring LANs to the faster ATM backbone technologies offered by Newbridge within its VIVID range. Users of these older UBN products should, therefore, be able to negotiate good deals and take advantage of cheaper ATM products. ‘We will make upgrading to the GeoLAN/500 as cheap as possible with good trade- in deals’, Colin Gibbs, director of marketing for the VIVID product range, told us last month. Also on the product agenda is the integration of Newbridge’s network management software with UBN’s own NetDirector. From a financial standpoint Newbridge has struck a good deal.
Maintained consistent revenues
Although UBN was not profitable – some estimates point to operating losses as high as $80m in fiscal 1996 – the company has managed to maintain consistent revenues for the last three years of between $350m and $377m, suggesting that there are areas of the business which are still lucrative if properly managed. Newbridge picked up UBN for a snip paying $96 million. For this relatively small sum Newbridge also bought a 10-12,000 strong base of corporate customers at which it can target its own products, and a sales channel of some 400 sales staff with local area networking product expertise which can now sell Newbridge’s VIVID. Newbridge hopes to persuade 30% of UBN’s installed base to buy Newbridge products within its next fiscal year. It will have to hit this target if it is to see 30-33% of its revenues coming from VIVID. Sales currently account for less than 10% of the company’s revenues. Newbridge also plans to stem the tide of what it regards as fruitless research and development projects which UBN has in the past thrown varying amounts of cash at. So far Newbridge’s game plan for UBN has met with mostly positive comments from former UBN customers we have spoken to. Many are relieved that the company’s fate has now been decided after hanging in the balance for so long under its former parent, Tandem Computers Inc. Most are also happy that UBN is now under the wing of a company specifically focused on networking and believe that this will only serve to benefit the UBN product line which has become somewhat stale and outdated. A lingering area of concern has been customer support. UBN has had an excellent reputation for product support which has enabled it to maintain a loyal customer base when its products have not exactly been leading edge. Many users seem concerned that this would evaporate once Newbridge took the reigns. Newbridge has said that it will not tamper with the support program. As it can ill afford to upset ex-UBN customers, it is likely to honor this commitment.
Taken from a more detailed report in M&A Impact, a sister publication.