The Big List A complete list of networking mergers over the past year. Doin' the Merger Mambo: What'll happen to your company's intranet when a merger comes about? IntraNet, 2/23/98. Consolidation breeds interesting times: Mary Petrosky looks at the effects of industry consolidation in the IT marketplace. Network World, 1/26/98. Behind merger madness: Fred McClimans sounds off on the good and the bad sides of mergers. Network World, 11/17/97. The NW 200 Best practices: Interviews with five top CEOs. Who's zooming whom? A list of mergers and acquisitions. What's in a name? A look at how the players got their names.

Acquisitions are reshaping the network industry landscape.

By Bob Brown
Network World, 4/20/98

Are you finding it increasingly hard to keep tabs on the players in this exploding market? Don't fret - it isn't your age creeping up on you. Mergers and acquisitions are reshaping the network industry landscape on a weekly basis.

Cascade Communications Corp. ventures forth with a bold acquisition, then turns around and gets acquired itself. Familiar icons McAfee Associates, Inc. and Network General Corp. merge and then re-emerge under the remarkably unremarkable moniker Network Associates, Inc. Gone are industry stalwarts CrossComm Corp. and U.S. Robotics, now each part of a bigger company.

Last year, domestic merger and acquisition transactions nearly hit the $1 trillion mark across all industries, but action in the network business was the most feverish of all. Telecommunications deals alone accounted for about 10% of those dollars, according to Securities Data Co., a Newark, N.J., company that tracks mergers and acquisitions.

Of course, the acquisition binge has affected most every segment of the industry, from security software vendors to Internet service providers to switch suppliers. Seven of the top 10 acquisitions in North America last year involved network product or service vendors, according to Broadview Associates LLC, a Fort Lee, N.J., investment bank that specializes in mergers and acquisitions.

These deals included WorldCom, Inc.'s surprise $37 billion bid for MCI Communications Corp., 3Com Corp.'s $7.3 billion purchase of U.S. Robotics, Ascend Communications, Inc.'s $3.6 billion buyout of Cascade and Compaq Computer Corp.'s $4 billion takeover of Tandem Computers, Inc. Compaq followed up the Tandem deal with the January acquisition of Digital Equipment Corp. for $9.6 billion. "It's not just the number and value of the deals that's striking - it's the boldness of the deals,'' says Greg Rossman, a principal at Broadview.

Industry watchers attribute the feeding frenzy to several factors. Despite some rocky moments for technology stocks during 1997, most of the leading companies' stock valuations were high, giving the firms plenty of money with which to play. Combine that with low interest rates, customer demand for one-stop shopping and a blossoming of start-ups in hot new sectors such as the Internet, and it's no wonder network vendors are in the mood to shop.

Take Microsoft Corp., for instance. The company has some $9 billion in cash on hand and a market capitalization of about $199 billion. Microsoft splurged last year to buy companies in the messaging, security and multimedia product markets.

Fierce competition is a big driver, as well. In telecom, for example, carriers looking to exploit a more open regulatory environment are scrambling to piece together end-to-end service stories. And internetwork equipment companies are locked in time-to-market races that have them out hunting start-ups developing Gigabit Ethernet, remote access and other gear. Cisco, which is oozing with money, bought six companies for a total of about $570 million last year and made a handful of minority investments to boot.

The result of all this activity is that the industry is coming to be dominated by fewer - but larger - companies. Start-ups have come to recognize how difficult it is to go it alone, resulting in far fewer initial public offerings last year. Only 134 venture-backed firms went public in 1997, roughly half the number that went public the year before, according to Securities Data.

Many small companies agree to be acquired not because they can't compete on the technology front, but because they can't touch the bigger companies when it comes to product distribution, says Barry Eggers, a general partner with San Francisco-based Weiss, Peck & Greer Venture Partners, L.P.

"In the mature datacom market, distribution is controlled by the big players,'' he says. "A private com- pany may have great technology but may not be able to reach enough of the market.''

For customers, the acquisition activity is a mixed blessing. The bigger companies tend to have stronger service and support staffs and a better variety of products and services. The downside is that there are fewer small companies around that can provide customized technology and support.

What lies ahead on the acquisition highway? More of the same, and probably some unexpected combinations as well, Rossman says. For instance, Rossman said he wouldn't be surprised to see a software company such as Novell, Inc. merge with a hardware vendor such as Cabletron Systems, Inc. or a software giant such as Oracle Corp. make a telecommunications-related purchase.

"There really aren't any rules,'' he says