After buying a 25% stake in Magnalink Communications Inc last May, Telco Systems Inc had decided by July to go the whole hog and buy the lot. Magnalink develops, manufactures and markets data communication products, such as bridges and routers, which are used to connect geographically remote local area networks through wide area networks. Formerly trading under the name of Cryptall Communications Corp, a privately-owned company, its name was changed following a management buy-out, headed by Mayer Yaniv and Jeffrey Weiss, who both still hold management positions. Magnalink is based in Norwood, Massachusetts, but was already familiar with Telco’s business from having shared local offices, although Telco is centred primarily in Nashville, Tennessee. Telco is a $100m-a-year publically-traded firm, made up of two other divisions apart from the new Magnalink. The first designs and manufactures network access multiplexers for the customer premises T1 market, and the second makes digital fibre optic transmission terminals and digital multiplexing equipment for T3 high-speed network access and distribution. Both companies saw the acquisition as mutually beneficial.
Possibilities of growth
Telco had concentrated traditionally on the more specialised wide area network market, where business tends to be concentrated in the hands of a limited number of big telecommunications companies and service providers, such as AT&T Co. It was attracted by the possiblities for growth and expansion offered by the more buoyant, faster-growing local area network sector, with its more general focus on the corporate end-user. In addition, Telco’s activities had always centred on the US, while Magnalink was more international in emphasis. Telco, therefore, was interested in gaining an easy access channel to the international arena. From Magnalink’s point of view, the main advantages of the takeover were the increased credibility associated with being part of a large organisation as well as the deeper pockets available to supply cash and engineering resources. In the UK, the sole importer and distributor of Magnalink’s products is Oldham, Lancashire-based ML Electro-Optics Ltd. All offerings are sold now under the joint Magnalink-Telco System name. Following on from the takeover, Magnalink is intent on refocussing business around its new optimiser, launched recently in the UK. The product, believed to be the way ahead for the company, is basically an add-on data compression device, aimed at those companies that already own multifarious bridges, routers, gateways and SNA controllers, but want extra performance from their existing equipment. It is claimed to increase through-put by ratios of anything from 2:1 to 6:1. Expected performance for local or wide area network broadcast and maintenance messages are said typically to be 6:1; for uncompressed graphic image transfers, 4:1; for text file transfers, 3:1, and for binary file transfers, 2:1. Although the ratios quoted do seem somewhat optimistic, the exceptional performance is attributed to Magnalink’s proprietary algorithms based on Leppei Ziv as well as a little twist of its own. Orders for the optimiser are said to be already pouring in, and the company is hoping to sell its other products on the back of the optimiser’s projected sales success.
