Cabletron, Cisco eye Yago
Two internetworking giants are rumored to be interested in acquiring Yago Systems, a developer of networking devices that combine switching and routing functions.
The developer of high-end networking devices that combine switching and routing functions is a hot property, according to sources, with internetworking giants Cabletron Systems (CS) and Cisco Systems (CSCO) rumored to be interested in acquiring the firm to augment their existing technology lineups.
Cabletron already has made an investment in Yago Systems, as reported by CNET's NEWS.COM in September. The size of the investment was not disclosed.
During Cabletron's announcement of fiscal 1998 third-quarter earnings last week, recently hired CEO Don Reed made it clear that acquisitions and investments will be a priority in the coming months to shore up weak spots in the company's product line. He reportedly said that high-end gigabit-speed networking equipment likely will be an initial target.
"Right now, Cabletron needs a number of things," said Fred McClimans, CEO of market watcher Current Analysis. "They need product they can ship today."
"Owning it only makes logical sense," McClimans noted. "If I were Don Reed, I would buy them yesterday."
Cisco may be interested in Yago Systems for two reasons: to flex its muscle as the largest networking firm in the industry and throw a wrench into a competitor's plans, and as a way to offer a high-speed alternative to its routing hardware and as-yet-unreleased Gigabit Ethernet switching technology.
"I would not be surprised to see Cisco meddle in this particular deal," McClimans said.
A Cabletron spokesman could not immediately be reached for comment. The company has been criticized for not moving quickly to add high-end gigabit-speed switching technology and routing functions to its portfolio of networking gear for corporations.
Coincidentally, Cisco also has been on the defensive regarding its plans for gigabit-speed switches due to its stated goal of releasing a product after a standard for Gigabit Ethernet is finalized in the first quarter of next year. Many firms already are shipping prestandard equipment, and industry observers doubt there will be any change in the standard for the next-generation technology between now and the time it is ratified next year.
Yago Systems has developed two lines of networking equipment--the MSR 800 and 1600--that essentially route individual data packets at switching speeds using customized hardware components called ASICs, an acronym for Application Specific Integrated Circuits. Both will ship in the first half of next year.
Details of a third product, a chassis-based system called the MSR 32000 that likely will support a variety of networking technologies, are expected to be released soon.
Cabletron has said it will be active with regard to partnerships and acquisitions despite its recent fiscal woes, detailed in an uncharacteristic preannouncement of earnings earlier this month.