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Chapter 13 - Data Communications: Adaptation 1979-1986

13.23 Digital Communication Associates

In early 1986, flush with cash and a high-multiple stock price, Nordin, having tasted the vision of becoming a force within data communications from the failure to acquire Rixon, knew Digital Communication Associates (DCA) had to participate in the networking sector of the T-1 multiplexer market and sell more than a point-to-point multiplexer. Nordin remembers the problems of developing a networking switch:

We had a product called the Netlink, which was a point-to-point product, a very good product. But, frankly, we didn’t have the engineering resources and perhaps to an extent the vision.

So never one to put off to tomorrow what needs to be done today, Nordin made contact with the two leading start-ups, Network Equipment Technologies (NET) and Cohesive Networks. In his meetings with them, he urged them to weigh the advantages of joining forces with a pubic company, one with a significant market presence. Craig Huffaker, vice president of finance of DCA, remembers that NET had begun thinking about going public and investment bankers, including Alex. Brown & Sons, had convinced them they would be a hot deal:

Bert [Nordin] actually talked with both firms about acquisition and we could have done either one. But, Bert was adverse to paying the kind of price tag NET thought they were worth, so we went to Cohesive.

The management of NET was not interested in the rumored $100 million being offered by DCA, especially when access to the public capital markets capital was being dangled before them. Nordin’s conversations with Cohesive Networks, on the other hand, quickly found traction, The OEM deal with GDC had proved a failure and Cohesive Network management knew they were falling behind their archrival NET and, more pressingly, were running out of cash. Rumors abound about a potential deal.

During that same summer, Smith of NET had contacted Caisse at Cohesive a number of times to request that they stop using edited NET materials in selling situations. Caisse proved uncooperative. Finally, NET filed a lawsuit demanding an end to the practices. As DCA was finalizing their plans to acquire Cohesive, they had one of their lawyers contact Smith to both understand the basis for the lawsuit in Smith’s words and possibly find a solution. Once understanding the situation, Nordin agreed to destroy the offending documents and cease the practices and NET settled the suit.”

In September 1986, DCA bought Cohesive Networks. Instantly, DCA was seen as a market leader able to challenge Timeplex and NET.