Another one bites the dust: Madge Networks Inc, based in San Jose, is the latest to follow the trend of getting hold of ISDN expertise through acquisition and is to pay around $165m for privately-held Teleos Communications Inc (CI No 2,840). However, Madge’s ambitions differ from some of its competitors, in that it does not intend to go for the low-end terminal adaptor market, but concentrate on ISDN wide area network access switches as part of its Switching to Asynchronous Transfer Mode strategy – to this end, Teleos will become Madge’s wide area network Access Products Division, remaining at its Eatontown, New Jersey headquarters. Recognising its strengths lie in frame and cell switching, Madge decided the best way to break into wide area circuit switching was through the acquisition, according to Cynthia Ringo, vice- president of business development. However unlike 3Com Corp, with its buy-out of Sonix Communications Ltd and Primary Access Corp (CI No 2,630) Madge’s ambitions remain towards the high end: We have been looking at companies in the ISDN space for some time, Ms Ringo says, but we didn’t want to enter into the low end of the remote access market. She compares the decision to avoid the low end with Madge’s refusal to get involved with the Ethernet adaptor market since our strategy is to add value, and Madge feels that ISDN terminal adaptors will develop into commodity products, as happened with Ethernet adaptors. Since Madge will use the Teleos products as a mechanism for transporting Asynchronous Transfer Mode data from the local network to the wide area network, Ringo says that fortunately there is not a lot of work to do over the coming year to tie the products into [Madge’s existing range]. Indeed, she added that much of the work will be to internationalise the existing Teleos range, since Madge derives over 60% of its revenues outside the US, while Teleos has traditionally remained within the US. This process will include the addition of other PABX protocols and to accommodate the different variants of ISDN. Madge also cites Teleos’s lack of a presence outside the US as evidence of the business opportunity that the company offers. Indeed, Madge has already won its first business as a result of the acquisition – it has signed a letter of intent for a joint development and technology agreement with Cisco Systems Inc under which the latter will license the ISDN switching technology for incorporation into a universal access server the firms will jointly develop for the carrier and Internet Service Provider markets. Reciprocally, Madge will license Cisco’s Internetwork Operating Systems for use in a wide area network AccessSwitch to be based around Teleos technology. While Cisco acquired low-end ISDN technology through its acquisition of Combinet Inc – ironically the area that Madge is avoiding – it has nothing in the high-end switching field and as such the licensing agreement is part of the company’s three-tier strategy to build, buy or partner on the technologies that it doesn’t already possess, according to the company.
