When Cray Communications, the British data communications equipment manufacturer was at its peak in the mid 1980s, it had an 8,000 strong product portfolio and a revenue of $643m. But, in the early 1990s, as the datacoms market began to mature and competition became more intense, the company lost its footing, suffered plummeting revenues and a drastic erosion of its market share. By 1995, radical action was needed. A management revamp resulted in a slashing of headcount and was coupled with a sweeping reduction of products. Early this year, that process was taken a stage further when the company decided to rip out the manufacturing side of its business. In a move that created some consternation at US data communications specialists 3Com Corp, it sold off its Ethernet switch manufacturing arm, based in Denmark, to Intel Corp for $72m. Its UK manufacturing operation went in a management buyout. This was not unexpected. Late last year Cray changed its name to Anite Group, choosing to focus on network services and support, and systems and software integration. Out of the ashes of Cray, two divisions have now emerged – Anite Networks, which is operating as a de facto reseller integrating US Robotics, Madge Networks Inc and Cisco Systems Inc hardware into legacy systems; and Anite Systems, specializing in software for vertical markets, telecoms products, and the provision of information technology contract personnel (which accounts for about $58.7m worth of business). It also acts as a Digital Equipment Corp reseller. Despite the recent, traumatic history, the future for the new, slimmed down Anite does hold promise. Group revenues are expected to reach $243m in the 1997/98 year, split evenly between the divisions, and a slight profit is expected.
Margins must improve
Nevertheless, some challenges still lie ahead. Ross Jobber, technology analyst at Union Bank of Switzerland, estimates that Anite Systems is operating at a 7% profit margin and is experiencing 8% growth, while the networking division is breaking even. But, he says, to keep driving growth, the networking division must show that it can improve operating margins and face up to industry giants such as British Telecom Plc and Siemens AG of Germany. These companies, backed up by the might of their telecommunications equipment and services businesses, are becoming increasingly powerful in data networking. The challenge for the multi-personality Anite Systems is equally difficult. Although repositioning has helped the company shake off the legacy of Cray, it has brought it up against some stiff competition – including German software giant SAP AG, Dutch success Baan & Co NV and services mogul Electronic Data Systems Corp. One of Anite’s key products, among a portfolio rich in specialist vertical market packages, is Unison, a manufacturing and distribution package, written in the Progress 4GL language which., it says, can be rapidly and cost effectively installed. But whatever the selling points, competing against SAP and Baan is tough. To make things a little more difficult, Anite also has a $32m long-term property lease liability inherited from Cray which offsets $25m cash in the bank. But given the company’s roller coaster past, there must be some at those who are praying that the ominous portents witnessed at a recent Anite Networks event are meaningless. Ashley Ward, the managing director of Anite Networks, was midway through speaking when he was interrupted by a loud shattering of glass as a $16,000 table gave way beneath the weight of a cameraman. He got as far as saying: Anite Networking has a bright… before the table crashed. He was trying to say future.
This article first appeared in the June 1997 issue of Computer Business Review.