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Trapeze Mulling Sale?

WiFi player Trapeze Networks Inc. is considering putting itself up for sale, according to industry sources.

The Pleasanton, Calif.-based company -- one of the largest private players remaining in the wireless LAN switch sector -- is said to be mulling a deal with of the larger public companies in the sector.

"I've heard it from multiple sources... including investors in the company," one industry insider tells Unstrung. "I think it is pretty serious, but they're not desperate by any means." (See Trapeze Grows in 1H.)

This source believes Trapeze's major OEM partners, Nortel Networks Ltd. and 3Com Corp. (Nasdaq: COMS), would be the most likely suitors.

Others, however, say Juniper Networks Inc. (NYSE: JNPR), which has invested in Trapeze before, could also be a name in the frame. (See Trapeze Swings $30M .)

Motorola Inc. (NYSE: MOT) is also an investor in Trapeze, but Motorola bought No. 2 enterprise WiFi player Symbol a year ago for $3.9 billion. Another major WiFi buyout seems unlikely. (See Moto's Symbolic Convergence.)

Trapeze itself would not comment on the industry chatter. A company spokesman, however, noted that CEO Jim Vogt has consistently said the company will "keep its options open."

Any Trapeze move could be indicative of another round of changes in the enterprise WiFi market. With Cisco Systems Inc. (Nasdaq: CSCO) continuing to hold and grow its WLAN market share, several WiFi startups are rumored to be considering their exit strategies.

— Dan Jones, Site Editor, Unstrung

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lrmobile_strungup 12/5/2012 | 3:02:53 PM
re: Trapeze Mulling Sale? - Trapeze greatly increased revenue in 1H
- Meru gains market share and moves into 4th position
- Aruba gains market share and moves into 2nd
- Cisco dominating market share.

Exactly who's losing ground? Marketing will have you believe that everyone's gaining market share. Seems like lots of window dressing trying to get themselves sold.

There's a lot of rumors that Trapeze and Meru are trying to sell to larger companies, but nothing has materialized.
CleanSheet 12/5/2012 | 3:02:52 PM
re: Trapeze Mulling Sale? Word from execs Meru recently hired (ex Juniper) is that Meru is in deep huddles with suitors on a deal. The $ offered is not much more than what Meru has raised so far so there's not much upside for the employees. CEO and a couple execs have carve-outs that guarantee they will do well but the rest, unaware of the carve-outs and special privileges, are heading for the Great Awakening if there's a deal.

Juniper took a look at Meru a while ago and walked for the same reason others are wary: Meru's IP is largely absent and their performance "advantages" based on tweaking the protocol which makes it very difficult for customers to install Meru in a multi-vendor environment.

Even as Meru has been adding execs on the sales side their revenue growth and margins have been flat to negative. A couple third- or fourth-tier college or school district here and there, something which has made some suitors extra cautious.
Star Man 12/5/2012 | 3:02:51 PM
re: Trapeze Mulling Sale? Meru has been for sale for the last 18 months. I think they have approached all likley purchasing companies. They would be very lucky in my opinion to get a price equal to the total VC money raised to date.
wirelessbob 12/5/2012 | 3:02:50 PM
re: Trapeze Mulling Sale? Okay guys, enough already. We already know that you work for WLAN companies, and you have an interest in bashing Meru. It's so obvious I shouldn't have to say it, ya know?

Meru says they're #4. Ok, if that is true, then they're probably about a year behind Aruba in revenues and will go public the same way like Aruba.

Where did Trapeze come out? They rely too heavily on OEMs in my opinion, but they seem to be growing. I'll bet they're not cheering that Meru come out ahead of them, but are they crying?

If these companies are growing like they say, then there's no way anyone is going to buy them. Who could afford a premium that takes that growth into account?
CleanSheet 12/5/2012 | 3:02:50 PM
re: Trapeze Mulling Sale? WirelessBob needs to attend remedial Eco101.

There is growth and Growth. If Aruba and Cisco are growing their wireless biz at say 40% year over year and Meru claims growth at 15%, guess where that leads to next? Sure, Meru may claim they are #4 (in a field of 4) and they are growing and it makes for a "nice" story for those ignorant of basic business fundamentals. It gets edgier when you consider the growth is based off a larger base for the former and a much smaller base for the latter.

If Meru's growth is compelling enough that they are "probably a year behind Aruba" how come we don't hear anything other than the odd school district and third-tier universities being placed on the pedestal and touted as their wins? Name a few significant enterprise wins, ok ok just two or three, and that's a question asked Meru many times and still begging for an answer. What explains their difficulties hiring replacements for those executives that left? a VP-Eng? a CFO? What explains the exodus of Meru engineers?
CleanSheet 12/5/2012 | 3:02:49 PM
re: Trapeze Mulling Sale? Let's buy into those #s that strungup quotes from Dell'Oro. Meru has 3% marketshare with annual revenues of about $10M. Elsewhere they claim to be #4 in market share. If 3% is for 4th place, it's likely the #1 (CSCO) has about 70%, #2 (Aruba) has about 20-25%, and the rest of the spoils are between #3 (probably 6-9%) and Meru and the rest.

The practical argument in front of us is that #1 and #2 and #3 are growing faster than Meru. What does that mean for Meru? If you argue the #1 and #2 are not growing faster than Meru and Meru's growth rate matches their's, isn't it still a straight forward exercise then to conclude that it's a matter of time before #s 1,2,3 own the market and Meru is left by the wayside, if that's not a reality already?

The point of this exercise is that Meru's survival depends on growing at >100% rates for several years and that's a business impossibility. Explains why so many Meru engineers fled for other pastures.
wavefront 12/5/2012 | 3:02:49 PM
re: Trapeze Mulling Sale? A year behind Aruba? Not exactly a good place to be (if you look beyond the hype). Have a look at Aruba's public filings from their IPO. Big loses every quarter - huge SG&A and practically giving product away. Very interesting "win" at Microsoft too - no profit from the sale and Microsoft ends up with a sack full of shares.
lrmobile_strungup 12/5/2012 | 3:02:49 PM
re: Trapeze Mulling Sale? Well personally I think you need to stop bashing Meru. From the Dell'Oro report they got around 3% market share, which translates to ~10M in revenue. Not a year behind Aruba, but not that bad either.

Since Trapeze doesn't report their numbers it's hard to postulate whether it's on par with Meru. If they don't do something soon the perception that they're fading may be cemented.
wirelessbob 12/5/2012 | 3:02:39 PM
re: Trapeze Mulling Sale? Let us put the name calling behind us for now. The urge has crossed me before to read SkEC filings, and I did so now to shed light on our situation.

Aruba reported product revenues as follows:
Apr 2006: $13.3m
Oct 2006: $19.1m
Jan 2007: $22.6m
Apr 2007: $29.8m
Jul 2007: $36.4m

If strungup should be right and Meru have ~$10m per quarter (not per annum Prescient), then Meru are where Aruba were on April 2006. I give Meru three quarters to file.

Prescient, if you compute the percentage growths per quarter, then you shall see that Aruba's last quarter was somewhat slower than previous, at 22%. I suspect that Aruba are slowing down. We don't know about Meru, for Meru are not public, but if they should enjoy the growth curves Aruba did at that size, they will see 40% growth per quarter. Also, Aruba are growing at 20%, and so will grow 100% per annum.

I agree that it would help is think if Trapeze were to participate in these reports.
lrmobile_strungup 12/5/2012 | 3:02:36 PM
re: Trapeze Mulling Sale? It's ludicrous that you would cherry pick figures to suit your needs. Counting only product revenue to justify Meru's comparison? Please.

Comparing the growth rate of of a 10M/q company vs a 40M/q company is nonsense. A 20% growth of the latter is gaining more market share than 40% growth of the former.

Clueless marketing abound.
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