Differentiate or Die

By now you've seen the news about Trapeze being sold to Belden.  WOW.  With annual revenues of $56 million, that's barely more than a 2X multiple. And word has it that the employees got nothing out of the deal as they had to pay off a bridge loan.

They were either very lucky or very stupid. Perhaps of little of both. But they certainly were worth a LOT more (or were they?).

Trapeze had (has) decent products, but they suffered from one fundamental problem: differentiation. They had none (aside from being utterly mismanaged).

Trapeze started off on the wrong foot from the get go when George Prodan, their marketing guy, came out "big," spending money like a drunken sailor. When they launched the company, they spent nearly $1 million at INTEROP on some big ass (40' by 50') booth - laughing obnoxiously at folks like Aruba (who went public for more than $1 billion while dumping ever since) and Blackstorm (now Airespace who was purchased by Cisco for $450 million) who were occupying the low-rent district of Startup City. 

Thinking the market would explode much faster than it did, Trapeze also hired a bunch of people too early - ultimately having to layoff about 23 percent of them in 2003. To fix things they brought in, happy-go-lucky, Jim Vogt. But Vogt did nothing to differentiate them.

Aruba had established a beachhead in the wireless security space and Airespace was positioned as the RF guys (thought they didn't know that much about RF). That said, Aruba has really been the only WLAN company with any real clear and defensible differentiation in the market.

What Trapeze SHOULD have done is stake claim as THE wireless management and ease-of-use WLANers (although their products aren't really easy to use). The middle market for Wi-Fi has always been under served because most WLAN systems are too costly and complex. This market is driven by the channel who responds to simple products that are easy to use, sell and install quickly. And this market is much much bigger than the high end.

Their Ringmaster network management system was highly acclaimed and much more advanced (at the time) than others. It let network managers really get a handle on visualizing the RF domain. Managing the RF domain remains a mystery to most in the Wi-Fi world. Few understand it or know what to do about it when problem arise. But instead, Trapeze tried to duke it out with the rest of the wireless LAN switch guys at the high end of the market.  Big mistake if you don't have the high-end products and nothing to differentiate you.

Ruckus Wireless, on the other hand, is differentiated up the ying yang. When entering the crowded enterprise market about a year ago, we recognized the essential need to be different. We decided that with Airespace swallowed by Cisco, there was really no one focused on RF problems. And with Trapeze and others failing to bring a simple but sophisticated solution to the middle market through the channel, opportunity was knocking - and knocking loudly. So we combined the best attributes of centralized wireless LAN management and married them with some very fancy beam forming and steering technology. 

To be fair, whether or not the market will care, remains to be seen. But enterprises have been extremely receptive so far. But rest assured, what we WON'T have to do is to is to pull up our skirts and make nice-nice to the likes of Ortronics.  :)

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Comments

[Scott]

Interesting comments on Trapeze deal. What is your view on Meru Networks? Are they bigger or smaller than Trapeze (and Ruckus?)

If a $56M WLAN company gets sold for $133M, and Aruba is worth only $400M or so, what does that mean for Ruckus' valuation? Can't be a good thing....

[David Callisch]

It's NOT a good thing. It's a terrible thing. Aruba's decline in value and Trapeze's low-ball acquisition have both hurt us tremendously. We've raised $42 million to date and have been hoping for at lest a 3X multiple. So much for that. But we're growing fast and still need to really establish ourself in the market. I don't think people think we're a real WLAN player yet. We are.

[realwirelessman]

Beam steering and forming has already been done, so your argument of "differentiation up the ying yang", should be "copy failed tech"...

Vivato proved that this technology works like a drunken sailor indoors.

So, congratulation on copying not differentiating, and good luck with a failed tech.

Fact is, if you knew anything about the past you'd probably have used the capital to start your company to buy a CD!!!

LOL

[George Prodan]

Dude, get your facts straight. I took Trapeze to Interop for less than $20k. Maybe you went home with the drunken sailors...