Chapter 12 - Networking: Market Order: LANs 1983-1986
12.6 Bridge Communications
In January 1983, Bridge Communications raised $3 million from venture capitalists with a post-money valuation of $11 million, up 200% from the valuation of February 1981. Now shipping their terminal server, they faced two primary sources of competition: dataPBXs and Ungermann-Bass. Judith Estrin remembers selling against dataPBXs:
In the first two years, we had like a five to one price differential, so there you sold to the people who were not bottom line conscious, but who were productivity conscious, making decisions based on productivity. We had features and sex appeal galore in the product: modularity of growth; the software features; the distribution; we had a whole list of things that you could do with this product that you couldn’t do with a data PBX, even though the function, the black box function, was the same. It wasn’t until three years into the company, as costs came down, that we were really able to go in and not only compete on a productivity, but on a price.
Competing against Ungermann-Bass was different as Bill Carrico recalls:
It’s funny because one of the ways that Bridge got beat up in the early years was Ungermann-Bass had broadband; again a non-standard broadband. We got beat up because Ungermann-Bass would use that to beat us up because that was the best lever they had. Our product, overall, was superior, but we didn’t have broadband, so they emphasized broadband, which is pretty typical.
With the cash raised from the financing, management began engineering a broadband product. They also had to solve the problem created by Xerox withholding the higher-layers of XNS. Acting quickly, they did a TCP/IP and Multibus technology transfer and license agreement with 3Com.
For 1983, revenue was $3.2 million and the loss was $1.5 million.
In 1984, LAN protocols become even more of an issue. Carrico remembers:
It was probably ‘84 that TCP/IP started to creep up to higher visibility in the marketplace, and people were starting to use TCP/IP more visibly, and that’s what prompted us then to go implement TCP/IP, and put it in the terminal servers and gateways and so on. TCP/IP then just slowly, completely encroached on XNS because it was standard, even though, with our very best implementation, it’s still half the performance of XNS on the network.
In June 1984, Bridge Communications announced a joint development and OEM agreement with Contel Information Systems under which Contel, a subsidiary of Contel Information Systems, would OEM $10 million of product over three years.
In late 1984, Ungermann-Bass finally introduced their 16/32 bit products, Estrin opines:
Ungermann-Bass refused to acknowledge that we were going to be a serious competitor. For two and a half years after we started they didn’t come out with a new software release. We had all these more advanced features. They thought: “We don’t need to worry about Bridge.” They kind of went about their own way, and by the time they stopped and said: “Uh, oh,” it was too late. That’s what happened with the data PBX guys too.
For 1984, revenues soared to $13.4 million, up 319%. A small operating loss resulted but net income totaled $.5 million due to the use of tax loss carry-forwards and interest income.