They are the names spoken of with a respect that borders on the reverence hockey fans reserve for the Original Six. Digital Equipment Corp, Amdahl, Bell Northern Research, Compaq Computer Inc., Tandem and Wang Technologies.Making a case for this reverence list is U.S. Robotics, but for different reasons. It is the high-tech success story that got away.
Last month Platinum Equity Partners decided to acquire U.S. Robotics for an undisclosed amount of cash.
Platinum is an L.A.-based mergers and acquisition firm that often buys IT companies. Last year Forbes magazine ranked it the 32nd largest private company in the U.S.
Its chief executive, Tom Gores, said he wants to use U.S. Robotics as a “platform” for future buyouts that he hopes will add up to the next big player in the wired and wireless electronics market.
In other words, Platinum is primarily buying the U.S. Robotics brand name, which maybe a long-shot move given the antiquated nature of the U.S. Robotics brand.
Long before Hewlett-Packard bought Compaq or Compaq bought Digital, the acquisition of U.S. Robotics by 3Com Corp. for a record, at the time, US$6.6 billion rocked the industry.
Should have worked
At the time, in 1997, the combined entity was to create a networking powerhouse with more than US$5 billion in annual revenues, more than 12,000 employees and a presence in some 130 countries.
The synergies seemed obvious, pairing U.S. Robotic’s X2 56 Kbps modem technology for high-speed Internet and WAN access, with 3Com’s Fast IP technology for high-speed LAN switching.
The challenge came from Cisco Systems, which continued to acquire smaller firms at the same breakneck speed it does today and remained much larger than its rival, integrating its purchases more deftly than 3Com managed to do.
U.S. Robotics, whose reputation was cemented among BBS operators with the Courier Dual Standard modems, may not have been the ideal merger partner it first appeared to be, either.
Though its modems had significant success at retail, the same was not the case elsewhere. Then OEMs started building modems into PCs and phone companies would move into the high-speed Internet business.
U.S. Robotics then made the gamble of buying Palm Inc. in 1995, to position itself for an emerging category of mobile/handheld computing devices.
3Com’s later decision to spin off U.S. Robotics was essentially looked upon by the industry as an admission of failure. The company then decided that Palm was the kind of company that should be running under no one’s banner other than its own.
What remains of U.S. Robotics today, and what Platinum bought, is a 120-person Chicago-based firm that continues to hold a large proportion of the market share for analogue modems.
The company is now being challenged on many fronts, but in particular by the VoIP companies in the market.
Its attempts to impose its X2 modem technology on the industry instead of the rival K56Flex — a standards battle that was sometimes likened to the VHS versus Beta standards battle in the video recorder industry back in the 1970s and 1980s — seems irrelevant today, as does its effort a few years ago to enter the already-crowded Network Interface Card (NIC) and wireless router markets.
The U.S. Robotics name was taken from the fictional manufacturer described in the robot stories by Isaac Asimov as “the greatest company in the known galaxy.”
Platinum’s plans for U.S. Robotics may be less ambitious, but only slightly.
As Platinum’s CEO said he wants to make the company as great as it once seemed it could be.