Timeplex Signals Bolder ATM Strategy
By Nick Wakeman
With a fresh acquisition and a strategic partnership under its belt, networking and communications company Timeplex Federal Systems Inc. is ready to flex its newfound muscle in the government ATM market.
The parent of Fairfax, Va.-based Timeplex Federal bought Simulation Laboratories Inc. of Ijamsville, Md., June 9, adding ATM access technology to its wide-area network products. That acquisition builds on a partnership the company formed in March with Alcatel Data Networks, Reston, Va., which added ATM backbone technologies to Timeplex products.
Timeplex wants to boost its presence in the fast-growing ATM market spurred by commercial and government customers' demand for a single network to carry voice, video and data, company officials said.
The Simulation Labs acquisition by Woodcliff Lake, N.J.-based Timeplex Group signals both the company's intent to pursue this market and a more aggressive overall strategy, said Warren Grasty, president of Timeplex Federal.
"This is a sign of a different mindset for the company," said Grasty, a six-year veteran of the company.
The impetus for change was the January purchase of the Timeplex Group by London-based Schroder Ventures, a venture capital group, from Ascom of Berne, Switzerland. The deal's terms were not disclosed.
The Timeplex Group had about $175 million in 1997 revenues, of which the federal unit represented about $30 million, said Grasty, whose goal is to triple government revenues over the next three years.
Adding the ATM access capability from Simulation Labs is a vital piece of Timeplex Federal's strategy of tripling revenues in the next three years, he said. That game plan likely will include future acquisitions, but Grasty said he was unaware of any pending deals.
"We are always looking to see what technologies to add to our core capabilities," he said.
Schroder Ventures is prepared to make acquisitions to build on the company's core capabilities, Grasty said. "In the past, we would have developed the technology ourselves," he said.
Timeplex is trying to position itself to take advantage of the proliferation of ATM networks, said Erin Dunne, manager of research services for Vertical Systems Group, a Dedham, Mass., market research and consulting company.
"Timeplex is trying to re-invent itself," Dunne said. "With Schroder, they want to look at the world like a lean and mean start-up."
The worldwide market for access devices is now worth an estimated $231 million, and should grow at a rate of up to 80 percent annually, hitting $646.8 million by 2000, she said.
"As the use of ATM services grows, so does the market for devices to access ATM services," she said. The access device market is "very active and very competitive" because manufacturers like Timeplex can sell to both ATM service providers and companies building enterprisewide networks, Dunne said.
Dunne said the market is wide open, even though Yurie Systems Inc. of Lanham, Md., solidified its hold as the top provider of ATM access devices when it was bought by Lucent Technologies of Murray Hill, N.J., for $1 billion in April.
"It is a volatile market, so it is a good place to step in," she said.
Grasty said Timeplex must be aggressive because the networking market has changed. This is no longer a marketplace for proprietary technology, so time to market is critical.
Simulation Labs, which will operate as a unit of the Timeplex Group, was facing similar pressure, said Tad Shields, president of the 15-employee company that had revenues of $3 million in 1997.
"We feel [our technology] is several months ahead of most of our competitors," said Shields. The company earns the lion's share of its revenues from the Department of Defense.
But it would take too long for Simulation Labs to gain access to civilian and commercial markets.
"To continue developing on our own, we would have lost the time to market advantage we have," he said.
The networking products that combine technology from Alcatel, Simulation Labs and Timeplex allow users to use a single network for voice, video and data, Grasty said. The products also allow legacy networks to connect to ATM networks.
"These are products that can support a variety of data," Grasty said.
Having a single network that can carry voice, video and data is of increasing importance in the federal market, especially for customers that deploy personnel on a tactical or temporary basis such as the Department of Defense, the FBI, the Federal Emergency Management Agency and the National Guard, he said.
Shields said that in such cases, weight, size and power consumption are critical factors. With a product that combines voice, video and data transmission, "you don't need extra equipment," he said.
While Timeplex' strategy of tripling revenues and expanding by acquisition is ambitious, other companies have done it successfully, Dunne said.
Grasty said getting bigger is going to be critical in the federal market. He acknowledged the company has not done a good job of getting its message across to the government and commercial markets that it is no longer a manufacturer of proprietary networking equipment.
"We need to get to a critical mass so we have the people to work with key prime contractors and keep our story in front of them," he said.