Chapter 10 - Networking: Market Competition 1981-1983
10.27 In Perspective
1981-1982 witnessed the early uncertainties and confusion of a forming market. Given sufficient economic potential in a perceived market, a large number of firms, both existing and new, will attempt to compete successfully for market share. In Networking, up to 200 firms announced products. In another common feature of emerging markets, the largest of firms often have the most difficulty competing. AT&T once meant communications and was on their way to becoming an also ran. AT&T was willing to disband to have the freedom to compete in the computer market, and they will, and they will fail. IBM had unsuspectingly introduced creative destruction with their PC, and yet had a hard time making sense of it. They got into the PBX business, and will get out in the future. They shadowboxed the LAN market into early paralysis, contributing more than their share to mass confusion. Or as DataPro, a respected research firm, wrote in December 1982:
Local area networking is one of the hottest topics on today's communications market. At exhibitions, conferences, and seminars, in trade magazines, newspapers, and newsletters, over lunch and at meetings, LAN has been the talk of the town. As a commercial offering, LAN is still so much in its infancy that no one yet knows all the questions. Let alone having all the answers. The marketplace itself has not yet jelled. No vendor involved in data processing, office automation, or communications wants to be left out, and every vendor seems to have a different solution to the LAN "problem."
No wonder customers were reluctant to do more than experiment until the plethora of choices made buying more certain: that even if their vendor did not survive, and who could pick the winner, the technology would not be obsolete but could be continued to be used and improved upon. Given the wide assortment of alternatives, it was not clear the best design would emerge from the unknowable market competition. So customers, particularly government agencies and universities, motivated the creation of standards making bodies to come to impartial recommendations. The making of standards is common to communications, whether it is languages or protocols, and the same would be true for Networking - the story of the next chapter. The following chapter picks up where this chapter ends, and takes it to 1986 when the market becomes orderly and some of the firms in this chapter come to dominate.
Exhibit 10.27.1 Networking Sales 1981-1982 ($ Thousands)
| COMPANY | 1979 | 1980 | 1981 | 1982 |
|---|---|---|---|---|
| UNGERMANN-BASS | Fnd | |||
| Revenue | 436 | 3,842 | 11,316 | |
| Net Income | -196 | -1,215 | -321 | 308 |
| Growth Rate | 781% | 195% | ||
| Net Income % | -279% | -8% | 3% | |
| 3COM | Fnd | |||
| Revenue | 281 | 506 | 1,810 | |
| Net Income | 10 | -124 | -690 | |
| Growth Rate | 80% | 258% | ||
| Net Income % | 4% | -25% | -38% | |
| BRIDGE COMMUNICATIONS | Fnd | |||
| Revenue | 15 | |||
| Net Income | -1,224 | |||
| EXCELAN | Fnd | |||
| Revenue | ||||
| Net Income | -249 | |||
| PROTEON | ||||
| Revenue | ||||
| Net Income | ||||
| Revenues of Public Firms | 717 | 4,348 | 13,141 | |
| Net Income of Public Firms | -196 | -1,205 | -445 | -1,855 |
| Growth Rate | 506% | 202% | ||
| Revenues of Private Firms | ||||
| Sytek | Fnd | 1,200 | 3,100 | 7,000 |
| Interlan | Fnd | |||
| Concord Data Systems | Fnd | |||
| Communication Machinery Corporation | Fnd | 130 | ||
| Total Networking Revenues | $63,000 |
Source of Data: Public Firms – Prospectuses; Total Revenues - Dataquest