Madge strikes fatal blow at Olicom

Madge strikes fatal blow at Olicom

Madge Networks has struck a serious blow to competitor Olicom, announcing last week the acquisition of its token ring business for over $US15 million.

The deal leaves Olicom's local operation with just one local employee, without its core product line and has forced a restructure of its channel.

Claus Hansen, Olicom's Australia and New Zealand managing director and only APAC employee, confirmed token ring products represent the majority of the company's business.

"From today, Olicom does not sell token ring," he said. "[The other APAC employees] have all been offered new jobs with Madge or we have been forced to fire them."

Hansen will continue to work for the company, but will keep a close watch on the company's moves over the coming months.

"We are negotiating with other parties with regards to other technologies," he explained, indicating Olicom may be in negotiations for the sale of its ATN and Ethernet products.

"If you ask me if Olicom will retain its brand, the answer is yes until further notice," he said.

"I think it's great for Madge and all token ring customers."

New Madge division Madge.connect made an up-front cash payment of $US15 million and will provide additional cash payments over the next three years based on Madge's token ring revenue performance.

As a result, the company has scored certain Olicom token ring inventory in the quarters following the sale, plus all the intellectual property and the rights to manufacture, sell and develop Olicom's token ring product portfolio.

The deal also includes Olicom's token ring customer base and some key Olicom employees, the company reports.

Ian Lisle, Madge's Australian marketing manager, said it will be "business as usual" for the local Olicom channel.

Lisle said he will visit local channel partners to explain the new structure, but indicated customers will still be able to buy Olicom products as usual.

The move has provoked a mixture of caution and indifference by two members of Olicom's local channel.

Felix Wong, technical director with exclusive Olicom distributor Advanced Portable Technologies, said he is uncertain about its effect on his business but was not surprised by the news. "We're still selling Olicom gear," he said.

Wong's attitude of the token ring industry in general is that opportunities still exist despite the technology's declining popularity.

He said the combination of the two vendors "makes the smaller pie palatable to a lesser number of players".

Wong believes customers will still request token ring products as long as they remain available and adequately supported. However, he conceded that "slowly over a period of time things will change".

Wong said he is expecting to sort out details of the new Madge channel over the coming weeks.

Gary Ganis, managing director of Olicom reseller Powerlan, said his reaction was "neutral".

"We have not done any business [with Olicom] or heard from them for three months," he said.

According to Madge, the market segment is worth $US1.4 billion, and supports around 20 million token ring users worldwide.

According to Mike Wilson, CEO of Madge.connect: "The Olicom acquisition is a catalyst for Madge.connect's strategy to accelerate development of next-generation token ring technology." Local Madge employees were unavailable for comment.

Meanwhile, Madge Networks has announced it will restructure into separate legal entities - Madge.connect (a global network solutions provider) and Madge.web (a global managed network and hosting provider), with Madge Networks N.V. as the holding company.

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