Force10, Turin Play Convergence Card

Force10 Networks Inc. and Turin Networks Inc. don't seem the most obvious pairing, but the companies argue they're preparing for a market where data center and service provider needs are going to overlap more and more.

The pair announced their merger agreement yesterday: Turin chief executive Henry Wasik will be CEO of the combined company, which will carry the Force10 name. (See Force10, Turin to Merge.)

It could be considered an anticlimactic turn for Force10, which raised more than $400 million and spent years on the IPO radar. (See Force10 Round Hits $113M , LR Reshuffles Private Companies List, and Force10 Networks Inc.)

But Force10's current CEO, James Hanley, says the company isn't going into this deal out of desperation. Force10 set a 2008 target of 30 percent revenue growth and got 90 percent of the way there, he notes.

Hanley also says the companies' combined non-GAAP revenues will exceed $200 million a year, well north of estimates from Zoominfo and other sources.

Turin, meanwhile, is coming out of a multiyear turnaround process, focusing on a few areas including carrier Ethernet, converged access, and wireless backhaul. (See Turin Turns Up the Volume.)

Backhaul, in particular, has potential for Force10, Wasik says, because the increased wireless speeds that come with enhanced 3G, such as high speed packet access (HSPA), and so-called 4G technologies, such as Long Term Evolution (LTE), will up the ante for the required Ethernet capabilities.

"Even though LTE may be out a ways, when the carriers look at your portfolio, it's a harder story for me to sell" without that big-iron Ethernet, Wasik says.

Even so, the merger looks defensive, considering ongoing consolidation in the industry and the fact that the companies have been serving different markets. Force10's equipment is built to be carrier grade, but it's best known for its work in data center and supercomputing environments. Turin has always targeted service providers.

The companies' executives don't consider themselves to be playing defense, though. As with the merger of Brocade Communications Systems Inc. (Nasdaq: BRCD) and Foundry Networks Inc. (Nasdaq: FDRY), albeit on a smaller scale, they expect their respective markets to converge. (See Brocade Takes Aim at Cisco (& Juniper).)

Large data centers -- Google (Nasdaq: GOOG) types -- are having to be built with the kind of reliability found in carrier networks, while service providers are beginning to look at hosted data centers as a possible revenue-generating service. "This sets us up for that long-term trend," Hanley says.

This also means Force10 and Turin expect to keep two sales forces -- one for the enterprise/data center world, and another to face service providers.

Layoffs are still inevitable, though. Not all 900 combined employees would be retained after the merger, Hanley and Wasik admit.

By getting pulled into Force10's world, Turin would be setting itself up against some big-name competition. Brocade, Juniper Networks Inc. (NYSE: JNPR), and, of course, Cisco Systems Inc. (Nasdaq: CSCO) are all putting heavy resources into new data center products and initiatives. (See Juniper Storms Into Ethernet Switching and Cisco's Nexus Targets Data Center's Future.)

Force10 has also had to contend with competition from Woven Systems Inc. and from newer entry Arista Networks Inc. , a company that includes former Cisco and Sun Microsystems Inc. executives Jayshree Ullal and Andy Bechtolsheim. (See Woven Weaves 10-Gig and Ullal Lands in the Cloud.) Hanley contends that Force10 has shown it "can compete very well" against the big guns, particularly Cisco. "We also have a next-generation product in the works similar to their Nexus announcement," he says.

Hanley also says the company has more plans in the area of virtualization, which is the hottest thing in data centers these days. (See Force10 Gets a View.)

— Craig Matsumoto, West Coast Editor, Light Reading

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stuartb 12/5/2012 | 4:15:01 PM
re: Force10, Turin Play Convergence Card This looks like a reasonably sensible move, although the providers will need to determine if the Gig E products from Force ten are carrier grade. The clearly have the capacities that carriers would like.
Hanover_Fist 12/5/2012 | 4:15:00 PM
re: Force10, Turin Play Convergence Card A sensible move that reeks of desperation - F10 could not or would not sell out to any of the potential buyers at the time because the funding VCs demanded an outrageous return on their $400M (and counting) investment that nobody was willing to grant as a condition of sale - so what's left for them to do? Merge with another flailing company inthe hopes that <1 plus <1 somehow creates a >1 market contender.
Iipoed 12/5/2012 | 4:15:00 PM
re: Force10, Turin Play Convergence Card They both had low margin sales merely to get their technology out there. F10 mostly bought their way into AT&T. In this economy why would anybody take on the stress of dealing with companies that are surviving based upon VCs keeping them afloat. FOUNDRY saw the writing on the wall and now have become a very viable alternative to Cisco.
stuartb 12/5/2012 | 4:15:00 PM
re: Force10, Turin Play Convergence Card Sure, I think everyone's expectations have come down a bit lately given the market conditions. I don't know that either company was/is flailing. They both seem to be doing at least as well, or better, than most. Time will tell.

bollocks187 12/5/2012 | 4:14:59 PM
re: Force10, Turin Play Convergence Card Force10 has an exceptional high end Ethernet switching product porfolio.

Turin has some exceptional carrier grade Ethernet and wireless backhaul products that are also temperature hardened.

While Force10 may be focused on data centers - the combined core switching and edge aggregation capabilities of the new company is impressive and easily outperfoms and costs less than anything you can get from Cisco and Brocade/Foundry for the service provider market.

Let us see how it works out in the first year before we pass judgement.
Hanover_Fist 12/5/2012 | 4:14:57 PM
re: Force10, Turin Play Convergence Card Bollocks,
An appropriate name...

Cost per port - an interesting magic metric that, given the F10 architecture, makes for creative mathematics.

Please back your "cost statements" with real numbers that compare/contrast F10 products to those of the competition.

I'm starting to get a whiff of Cabletron on these postings....
sgamble 12/5/2012 | 4:14:56 PM
re: Force10, Turin Play Convergence Card "...with better products .."

Lipoed, I thought you retired from Foundry after you cashed in? Is Foundry shipping you 'special water' still? Buy bottled water, Sir.
Iipoed 12/5/2012 | 4:14:56 PM
re: Force10, Turin Play Convergence Card Why do you think Foundry Extreme and others have barely made a dent in Cisco's market share in switching. Because no one loses their job buying Cisco. Cisco may be slower, less technically advanced and more expensive but they support the heck out of customers by throwing people and more people at issues. It took Foundry 10+ years to get to 600 m in revenue with better products and that is probably what cisco does in a couple of weeks. Do you honestly think the f10/turin solution will be taken seriously other than by those that have no money to spend and are not at their companies for the long haul?
chechaco 12/5/2012 | 4:14:55 PM
re: Force10, Turin Play Convergence Card "... Turin has some exceptional carrier grade Ethernet ..."
I beg your pardon but this program was canceled last fall. Unless your definition of Carrier Ethernet is one based on xSTP.
Iipoed 12/5/2012 | 4:14:54 PM
re: Force10, Turin Play Convergence Card First of all it is not Lipoed it is Iipoed as in I ipoed. Not sure what water has to do with it but watch out for BJs new company. I can't wait to start beating on doors of my old customers. Don;t need the money but try getting up every morning for the last 8 years and trying to figure out what to do that day. Let me know if you are one of my old customers so we can schedule lunch real soon.
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