It seems that all we talk about these days is gloom and doom stuff. Mostly it's with good reason, as the economy and the tech sector have run up against a pretty solid wall.

Just in the past week we saw former DSL-darling NorthPoint (which sold most of its assets to AT&T in a liquidation sale) announce that no new buyers had stepped up to the plate with anything worth considering and that service would experience "network outages and termination of service" post haste. And while there's plenty I could say about Lucent's Agere IPO last week, but I'll let their first day closing price of $6.02 (after opening at $6 -- less than a third of their original anticpated price) speak for itself.

But not all is bad in the tech sector. Take, for example, the Phoenix-like rise from the ashes of both Cabletron and Iridium (that's right, the satellite-phone company you thought had burned up).

Cabletron started running into problems even before the tech-stock bust thanks to an aging product line and a changing market. But two years of metamorphosis has turned it into a company that might be unrecognizable to founders Bob Levine and Craig Bensen.

By focusing on strict budget control, hoarding as much cash as possible and splitting up the company into four distinct companies, CEO Piyush Patel has literally reinvented the firm.

Old and low-margin products were scrapped. A balanced business strategy with a healthy 50-50 mix of domestic and international sales was instituted. The results, which include over a billion in cash, solid profits and better than expected earnings, have helped to boost Cabletron shares upward.

Meanwhile, Iridium was also reinventing itself, emerging from a bankruptcy fire sale ($5 billion worth of satellites and ground stations went for a mere $25 million) last week to restart its global wireless services.

The new management has ditched the old and failed effort to target the commercial market with expensive and bulky equipment. Instead, the company now focuses on niche markets, including military users and companies with workers in really remote locations (think oil wells in the North Sea).

Gone too is the original $7/minute rate, chopped to $2/minute (right in line with competitor Globelstar, which is now choking on the same kind of debt that crushed the original Iridium).

Add in less expensive and less bulky handsets and you've got a debt-free company that could actually build a new market.

OK, so maybe Iridium will never become a competitive threat to established wireless players. And Cabletron will likely never again give John Chambers much to worry about. But that's OK. The two companies have shown it's possible to make money by giving users in specific niches the products they want at reasonable prices. Especially given the market today, you'd have to call that success.

» posted by ITworld staff

Network World

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