Back from the Valley – things are going to be different…
In the world of networking, things are really different. In the world of internet IPOs I guess they are really just the same. The Groupon S-1 filing is an interesting read. I understand the need for the IPO, but I would caution that the pricing of the deal is going to be really important. My guess is there will be a large number of shorts waiting in the market depending on the pricing. Any time a buy side analyst can calculate bankruptcy on spread sheet it is not a comfortable position for the company or the banker trying to sell the stock. Some interesting takes on the filing here, here and here. I would bet that a few savvy hedge fund PMs were yelling at their traders to get a borrow on the stock a few minutes after the filing hit the EDGAR database. For every EBAY and AMZN, there are failures to point out and here a few:
- Webvan. IPO date: Nov. 11, 1999. Priced at $15 per share. Biggest IPO of the first internet boom. Webvan closed its first day of trading with a $6.4 billion market capitalization. Filed for bankruptcy in 2001.
- MP3.com. IPO date: July 21, 1999. Priced at $28 per share. The third-biggest IPO of the first internet boom. A year later, shares plummeted following a spate of copyright infringement suits.
- EToys. IPO date: May 19, 1999. Priced at $20 per share. Value at over $2 billion by the end of its first day of trading. Filed for bankruptcy in March of 2001.
- Pets.com. IPO Date: February 10, 2000. IPO to liquidation in nine months.
Truth be told I hope GRPN is wildly successful. With a networking technology background, I think any internet based business that drives commerce is a really good for the network infrastructure business. In the world of networking so much has changed in past five years and I am not talking about GRPN. The next few years are going to be far more interesting and I do not recall a setup like this since the early 1990s.
Here is a blog post by Jim Duffy about CSCO competitive practices from a Bloomberg article. Personally, I do not care about Cisco’s competitive practices. What I found interesting in the Bloomberg article were the companies that were beating Cisco. In one example it as Juniper (ok no real surprise there) but in the other example it was Arista, Mellanox and Xsigo. I have posted a few times about product cycles and specifically Cisco’s products cycles. What I find interesting in the world of networking is the large incumbents have all be pushing architectures for a couple of years now. They have sexy tech names and all sorts of promises designed around winning large frame agreements from customers for network spends. My belief is when companies, especially large companies, start selling you architecture – they stopped solving your problems.
What I think is different today from five years ago and looks more like 1991-1993 to me, is the drivers of technology choices and deployment scenarios. The drivers are not coming from the large incumbent technology suppliers and choices being made by the end-users are less influenced by the large suppliers. This is especially true in the enterprise market. What is occurring in the network and started in the data center is going to rapidly eclipse the expectations that were assumed to be true when many of the various network architectures were envisioned. Trends and influences have not gone as they were expected from two years ago. The game is afoot and companies that we will be talking about three years from now are most likely not the companies we are talking about now. I know this because for the first time in a long time, end users are willing to make a new choice to solve the problems that are not being addressed by their legacy equipment supplier. If I had to theorize on the course of this wave, which is coming from the enterprise, I would estimate it will translate to the service provider market in 18-36 months.
* It is all about the network stupid, because it is all about compute. *
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