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Fore denies merger rumors

ATM networking vendor Fore says that despite talk it will not be the latest acquisition in the industry's merger mania.

Interop LAS VEGAS, Nevada--Fore Systems (FORE) has had a rough ride recently. But despite persistent rumors, the company's CEO says Fore will not be the latest acquisition in the merger mania sweeping the networking business.

Once a highflyer on Wall Street, the ATM (asynchronous transfer mode) networking stalwart has been taking hits since its last quarter came in below analyst expectations. The once-booming firm seems to be caught up in an overall networking market shift as the sector matures. The recent woes also could be the first signs of a company that has ridden high-speed ATM gear to its profitable apex.

Networking companies are increasingly joining forces to offer customers well-rounded solution packages that cover LAN-based switching and wide-area routing and ATM--a technology used primarily to interconnect multiple LANs in a campus or multiple sites over a wide area. The most recent megamerger--worth at least $3 billion--married Ascend Communications with Cascade Communications.

At the close of Spring Networld+Interop 97, Fore CEO Eric Cooper told CNET's NEWS.COM that rumors that Fore Systems is an acquisition target are unfounded.

"As soon as people look at Fore, they can easily say 'this would be a great combination,' and before you know it rumors get started without, necessarily, any basis," Cooper said. Companies such as Hewlett-Packard, Cabletron Systems, and several telecommunications firms--Northern Telecom among them--have been viewed by many analysts as likely candidates to buy Fore.

Last month, the company announced that sales and earnings would be below expectations for its fourth quarter. The announcement dragged the stock down to the teens from about 35 when the fourth quarter began. The quarter also marked the first-time revenues fell from the previous quarter's level in more than two years.

Some analysts have viewed Fore's close association with ATM as an alliance that could hurt the company since its LAN-based Ethernet switching devices do not seem to have the same marketing muscle behind them. But Cooper said revenue generated from the switching side of the business does not reflect any problem. "We have the most name recognition for ATM, but about 35 percent of our revenues come from the network switching that feeds the ATM core of our product line," he said.

Cooper said the merger mania that has gripped the industry in recent months may be ebbing, and vendors looking to offer a "one-stop shop" approach may be underestimating the changes in the marketplace.

"I think the trend to offer total solutions has probably peaked and will start to go the other way," Cooper predicted. "The entry of folks like Intel and Compaq Computer into the networking market is going to fundamentally alter who the CIO buys the network from, and that single-vendor solution is going to be wishful thinking for some of our competitors. The commoditization is going to accelerate."

ATM technology, which is optimized for a variety of traffic and includes protocols to support a variety of bandwidth services within the pipe, is viewed by some as a complicated networking play that requires a complete reconfiguration of a topology. That is why the hype surrounding Gigabit Ethernet at this NetWorld+Interop is so high. Many view it as a technology that offers next-generation bandwidth while maintaining classic Ethernet elements.

"I think Gigabit Ethernet will make sense for some edge connections," observed Cooper. "I think it will have some limitations in the backbone that, frankly, I haven't been convinced there are any easy solutions to. Every one of our customers has an existing network. Every one of them has added our product to it without throwing away what they've got."

At the show, Fore announced new backbone uplinks that tie its ES-3810 Ethernet switch to ATM. The new 8- to 18-port modules offer both auto-sensing 10/100 mbps (megabits per second) functionality as well as dedicated 10 mbps speeds. The new modules are available immediately with prices starting at $1,095