December 17, 2012
linksys saleCisco Systems (NASDAQ: CSCO) is trying to sell its Linksys home networking business, according to Bloomberg. The VAR Guy’s reaction: Smart move, since it may help Cisco to sharpen its focus on converged data centers. So, which technology companies could potentially buy Linksys? The VAR Guy sees at least 18 potential suitors — from obvious names like D-Link and Netgear to private equity firms. Here’s a list of potential suitors, and their predicted level of interest in Linksys, care of The VAR Guy.
First, the chatter: Bloomberg says Cisco has hired Barclays to find potential buyers for Linksys. If true, this is CEO John Chambers’ latest step to exit low-margin or slow-growth businesses. Chambers earlier killed the Flip handheld video camera and the Umi home telepresence business. Cisco also killed its Cius tablet running Google Android in May 2012, essentially conceding that its corporate tablets could not compete against consumer-first devices like Apple iPad.
Chambers’ bigger priorities going forward include converged data centers where networking, storage and compute come together. He must also deal with the reality that partners like VMware and EMC are pushing their own converged data center visions. In VMware’s case, the strategy is called the software defined data center.
Cisco and Barclays declined to comment on the Bloomberg report.
Who Will Potentially Buy Linksys?
But let’s say the report was accurate. If so, which companies could show an interest in buying the Linksys networking business? Here are 18 potential Linksys bidders and buyers on The VAR Guy’s radar. Please note: The VAR Guy did not request comment from any of these companies, and his opinions below are based on educated hunches covering the networking industry since 1992.
The shortlist of potential Linksys bidders and buyers may include…
Actiontec Electronics Inc.: A key supplier to broadband companies and consumers seeking wireless networking and more. Has relationships with CenturyLink and Verizon. Founded in 1993, the Sunnyvale, Calif.-based company has offices in Colorado Springs, Colo.; China and Taiwan. The VAR Guy’s Prediction: Low interest in buying Linksys
Asus: Best known as a global supplier of PCs, ultrabooks and tablets, ASUS also makes networking equipment. And that has The VAR Guy intrigued. The VAR Guy’s Prediction: Medium interest in buying Linksys
A Cable, Telco or Broadband Company: This is where things get really interesting. What if a broadband service provider wanted to really tightly control home networks? Buying Linksys could be a path forward, but could the broadband company really offer best-of-breed solutions by focusing entirely on Linksys and alienating third-party network hardware companies? The VAR Guy’s Prediction: Low interest in buying Linksys
Belkin: A true consumer-centric company that makes a range of peripherals. The privately held company, founded in 1983, now has 1,200 employees in 21 countries, and is headquartered in Los Angeles. The VAR Guy’s Prediction: Medium interest in buying Linksys.
Buffalo Technology: Best known for its network attached storage (NAS), Buffalo also offers networking hardware. The company is based in Austin, Texas, but has global reach. The VAR Guy does not have a feel for Buffalo’s financial standing and potential war chest. The VAR Guy’s Prediction: Medium interest in buying Linksys.
D-Link Corp.: Despite having a strong consumer networking brand, D-Link itself has seen its shares fall sharply over the past five years. Headquartered in Taiwan, D-Link has about NT$6.476 billion in capital, according to the company’s investor relations website. The VAR Guy’s Prediction: High interest in buying Linksys.
Dell: The PC giant has worked in and around the networking market for more than a decade. But Michael Dell is focused on higher-margin opportunities like converged data centers. The VAR Guy’s Prediction: Zero interest in buying Linksys
EnGenius Tech Inc.: Established in 1999, EnGenius Technologies, Inc. is a wholly-owned subsidiary of Senao Networks, a Taiwan RF communications manufacturing company. Yes, EnGenius has a U.S. presence, but The VAR Guy has no idea if the company has proper financing to make a potential offer for Linksys. The VAR Guy’s Prediction: Medium interest in Linksys.
Lenovo: The PC giant continues to buck market trends, gaining market share and showing profitable growth. Lenovo also is pushing deep into tablets, smartphones and perhaps even smart TVs. While some folks struggle in low-margin industries Lenovo has a knack for turning profits where rivals can’t. Could home networking be the next example of that? The VAR Guy’s Prediction: Low interest in buying Linksys.
LevelOne: Launched in 1991 in Dortmund, Germany by Digital Data Communications GmbH. The company now has 20 branch offices worldwide and a focus on multiple IT markets — including home networking. The VAR Guy’s Prediction: Medium interest in buying Linksys.
Microsoft: The software giant has certainly been pushing into the hardware market and the company wants to own the digital home, with products like XBox and now the Surface tablets running Windows 8 or Windows RT. But remember: Microsoft killed Windows Home Server and earlier killed its own networking hardware and Zune music player. The VAR Guy’s Prediction: Zero interest in buying Linksys.
Netgear: One of the best-known suppliers of home networking gear, Netgear in Oct. 2012 said Q3 revenues rose 4.4 percent to $315.2 million and net income slipped a bit to $23.8 million in the quarter. Perhaps Netgear can gain economies of scale by acquiring Linksys. Shares of Netgear have rallied over the past four years or so, but will the company focus more on corporate IT and service providers or home networking? Hmmm… The VAR Guy’s Prediction: High interest in buying Linksys.
Private Equity Company: Whenever a slow-growth or under-performing IT asset goes up for sale, the bidding process typically attracts private equity firms. But The VAR Guy has to say: Home networking isn’t exactly a high-growth market with sexy margins. Could private equity firms find another way to unlock Linksys’s value? The VAR Guy’s Prediction: Medium to low interest in Linksys.
Tp-Link: Headquartered in Shenzhen, the company’s products are deployed in more than 120 countries and serve more than 1 billion users worldwide. The VAR Guy doesn’t have a feel for the company’s financial performance. The VAR Guy’s Prediction: Medium interest in Linksys.
TrendNet: Headquartered in Torrence, Calif., TrendNet has built networking solutions since 1990. The company’s products are sold in 120 countries. Here again, The VAR Guy doesn’t have a feel for the company’s financial performance. The VAR Guy’s Prediction: Not close enough to the company to say.
Western Digital Corp.: Best known for its storage solutions, Western Digital (NASDAQ: WDC) also makes networking solutions. The company as of Sept. 2012 had $3.5 billion in cash and cash equivalents. But is the future a home networking buy or more of a cloud storage focus? The VAR Guy’s Prediction: Low interest in buying Linksys.
ZyXel: Headquartered in Anaheim, Calif., the company’s product portfolio is pretty massive and includes home networking. The VAR Guy’s Prediction: Not close enough to the company to say.
Whom Did The VAR Guy Miss?: Surely, there are additional networking and IT vendors that will show an interest in Linksys. Whom did The VAR Guy miss on his list? Feel free to post a comment to show off your expertise.
That’s all for now. The VAR Guy, in the meantime, will watch the potential Linksys bidding process closely.
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