Fore shifts focus to ATM services

Last week Fore launched a revised strategy that minimizes its core strength in ATM technology, and instead focuses on the services that ATM can offer users.

4 min read
The words coming out of Pittsburgh, Pennsylvania-based Fore Systems (FORE) sound a lot different from those spoken only a short time ago.

Fore rose to prominence in the networking hardware industry in the early 1990s by going ga-ga over a next-generation pipe called ATM (asynchronous transfer mode) that promised to carry data, voice, and video at high speeds across dispersed networks. The company's devotion to the ATM cause carried it to the top of the heap as the technology became a "backbone" connection between wide geographic regions, interconnecting networks.

But the hype surrounding ATM in the early 1990s led some to believe that it would quickly replace more common Ethernet technology as a means to connect PCs to servers in a LAN (local area network). That hasn't happened.

At last week's Networld+Interop trade show in Atlanta, Fore floated a revised strategy that minimizes its core strength in ATM technology, and focuses on what services that underlying networking pipe can provide to users. In the meantime, different types of data increasingly battle for access to bandwidth over the same link. Stressing the services within the pipe offers a contrast with the nascent next-generation Gigabit Ethernet gear, Fore officials said.

The company will now focus on the "intelligence" that use of ATM and accompanying software can offer users. The recent completion of the MPOA (multi-protocol over ATM) standard allows ATM providers to highlight the pipe?s services and priority features.

Fore makes a series of local area ATM switches, as well as changes to wide area ATM access gear. Starting in 1995, the company added to its core strengths by acquiring Ethernet-based networking providers. Some thought this expansion would catapult Fore into the upper echelons of the networking industry. However, several industry pundits note that though a significant amount of revenue is derived from the Ethernet side of the house, Fore has not pushed the Ethernet side of its business as it has ATM.

In recent months, Fore has also battled the perception that it has ridden its ATM strengths as far as it can. A series of disappointing financial quarters has left the once high-flying networking company at a crossroads in some people's minds. And when acquisition rumors spread these days, they often involve Fore.

But company officials insist that their brand of networking expertise remains a viable option. And they stress the ongoing convergence of different types of data and cost reductions for ATM technology as evidence that warrants their initial plunge into the technology.

"We're making the transition from a technology company to a marketing company," admitted one Fore official.

"They recognize the fact that it's going to be Ethernet on the desktop ? that's a huge religious conversion from a year ago," said David Passmore, president of Decisys, an industry consulting firm. "They're market driven and the market is telling them that Ethernet has won the battle."

Pesky financial concerns remain. Fore is due to report results for its second 1998 fiscal quarter toward the end of this month. Consensus estimates from FirstCall peg the company's earnings per share at 6 cents, a far cry from the company's boom period. Company officials have blamed a slowdown in the Asia-Pacific region as the primary cause for the company's bump along the road. Competition has also increased from the likes of Bay Networks and Cisco Systems.

But that didn't stop shareholders from filing suit against the company in July, claiming the firm artificially inflated Fore's stock price so they could gain from the sales of large numbers of shares.

There are also takeover rumors. Fore has been linked to companies in the telecommunications field looking for an entry into data networking, as well as more traditional rivals like Cabletron Systems and Hewlett-Packard. Most analysts agree that suitors will most likely be service providers, with Northern Telecom and Lucent Technologies primary candidates to gobble up the ATM stalwart.

A study released this week by Sage Research suggests that there is hope for ATM. Based on a study of 114 firms using ATM in production networks, the report found that 70 percent of users are implementing ATM primarily as an upgrade from existing local area infrastructures based on common technologies like Ethernet and Token Ring. That could be good news for Fore.

The networking firm also trumpets the recent announcement by Microsoft that Fore gear would be placed in the core of its ATM network in the Seattle area.

The company also recently announced a 40-plus percent price reduction on high-speed ATM switches, and a new ATM-based processor for its gear based on Intel Pentium technology.

Fore's stock has leveled off at around $20 per share from a $10 low in May.