Compaq reorganises networking division

Compaq Computer is reorganising its networking unit to better reflect changes in buying patterns among users, and will rely on partnerships with third-party manufacturers to offer networking products in the future, according to company officials.

Starting this week, portions of the Network and Access Communications (NAC) Division will be brought into other product groups, according to John Ardini, vice president of networking programs for NAC.

Remote access servers and network interface cards will be brought into the Server Division, modem products will be moved to the PC Division, and the company's hubs-and-switches business will remain in the NAC unit, within the Enterprise Group, Ardini said.

"The NAC Division continues to exist ... but it will be smaller," Ardini said. No NAC employees will lose their jobs as a result of the switch, said Ardini, though he declined to specify the current or future size of the NAC unit.

The reorganisation is not to be taken as a sign that Compaq is retreating from the networking business, Ardini stressed. Rather, Compaq is moving responsibility for various networking products into the appropriate computing groups to facilitate sales of systems solutions, Ardini said.

"We saw the role of networking as becoming integrated into solutions," Ardini said. "When customers are purchasing servers they're also asking the networking questions ... so we want to integrate our offerings," he said.

Compaq has had some of its own networking product manufacturing capabilities through acquisitions of Digital Equipment Corp., Microcom and other companies. But for next-generation products, as well as for enhancements to current products, Compaq will look to relabel equipment made by business partners such as Cabletron Systems, Ardini said.

At least one analyst was critical of Compaq's move, however.

"What's happening on the low end is a commoditisation of networking products, and the margins are just not there to make money relabeling other people's products," said Tom Nolle, president of CIMI, a networking consultancy in Vorhees, New Jersey. "My speculation is that this is an interim step at the low end of the market, as a market place holder to validate the market opportunity until they decide to do something else. I see this as more of a de-emphasising of the high end of the (networking) business because there is no indication they have any influence in that portion of the market."

Meanwhile, Compaq's positioning of its network business reorganisation as a way to reflect changes in buying patterns does not make sense with what Nolle views as the marketplace reality.

"If that's what they really think they must be smoking something," Nolle said, stressing that hardware and networking purchases are still based on separate decisions. "There's no indication that the buyers of server equipment and the buyers of networking equipment are the same people -- look at the networking leaders, none of them make computers, and the IBM and Hewlett-Packard networking divisions have struggled for years."

Compaq can be a huge force in the low end, but it will need to put out its own products, Nolle said. The quickest way to do this will be to buy a networking company and focus on the low end, he said.

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