Madge Networks
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Madge Networks NV.. founded by Robert Madge and best known for its work with Token Ring, was a global leader and pioneer of high speed networking solutions in the mid 1990s, and also made significant contributions to technologies such as Asynchronous Transfer Mode (ATM) and Ethernet.
The company filed for bankruptcy in April 2003. The operational business of the company is currently trading as Madge Ltd. in the UK. Under a deal with Network Technology PLC, the company acquires the rights and copyright to Madge’s products, brand and website, as well as the remaining inventory. The assets will be absorbed by Network Technology subsidiary Ringdale Limited, making them the world's largest supplier of token ring technology.
Madge Networks N.V. was one of the world's leading suppliers of networking hardware. Headquartered in England, Madge Networks developed an array of Token Ring, Ethernet, ATM, ISDN, and other products providing extensive solutions for the corporate LAN (local area network), WAN (wide-area network), intranet, internet, and video conferencing markets. The company's products ranged from ISA- and PCI-bus adapter cards for personal computers to work group switching hubs, routers, and ISDN backbone carriers, with an emphasis on providing convergence solutions among Ethernet, Token Ring, ISDN, and the emerging ATM networking technologies. In addition to its Wexham, England headquarters, Madge operated main offices in Eatontown, New Jersey, and San Jose, California, as well as offices in more than 25 countries throughout the world.
Founded in 1986, Madge Networks was a pioneer the networking market, the emergence of which went on to define internal and external communications among corporations in every industry. Madge Networks was one of the world's leading proponents of Token Ring technology, producing the ISA, PCI, and PC Card adapters, switches, stacks, and other devices required for its implementation. In the late 1990s Madge Networks also has taken a leading role in developing the standards and first implementations of emerging High Speed Token Ring (HSTR) technology. This newer protocol provided for a dramatic increase in data transmission bandwidth, while remaining backward compatibility with first-generation Token Ring technology.
Sale of the company's Israeli Lannet subsidiary to Lucent Technologies in July 1998 reduced Madge Networks' presence in the Ethernet market, a rival networking technology to the Token Ring standard. Instead, Madge made the tactical error in tightened focus in the ATM market space and the then emerging video conferencing technology and ISDN carrier applications, producing switching, routing, WAN-LAN interfacing equipment to facilitate both intracorporate and intercorporate video conferencing. In the ISDN market--using digital telephone lines to increase data, voice, and video transmission bandwidth--Madge developed a line of Edge Switching Nodes (ESNs) and other carrier equipment.
Madge Networks has now been absorbed into Ringdale Limited after a management buyout and filing for bankruptcy in 2003. There is a deep irony that in 1997 Cisco systems offered Robert Madge $880 million for his company lock stock and barrel, in what is now one of the worst business decisions of the 90's, Robert Madge refused.
One-time horseback riding instructor, Robert Madge entered the computer industry with Britain's Intelligent Software Ltd., designing computer-driven chess games. In 1986 Madge sought to set up his own business, opening shop on his family's Buckinghamshire, England farm.
The Ethernet field was already crowded with competitors by the mid-1980s, when most of the money was made by 3COM in the adapter market with their 3C509 series. Madge's choice of Token Ring proved a shrewd one. Loath to take on the IBM powerhouse, other companies avoided the Token Ring market. Meanwhile, Madge could develop a profitable business operating in IBM's shadow. Madge Networks introduced its first Token Ring products by 1987. The company quickly opened up a second headquarters in San Jose, California, placing the company closer to the heart of the worldwide computer industry, a move that provided additional benefits: the company's U.S. customers believed Madge to be a large British company; Madge's U.K. customers, on the other hand, saw Madge as a successful U.S. company. Indeed, Madge's early decision to establish a U.S. presence later would be credited as essential to the company's survival and success.
Not content with simply selling Token Ring products, Madge led his company to extending the technology, introducing new products, such as the Smart Ringnode in 1989 and the company's Fastmac technology in 1990, that would bring it to the forefront of Token Ring research and development. By the early 1990s the company had outpaced even IBM's development efforts--and the larger company would begin recommending Madge's products to its own customers. An early boost came from the licensing of Madge's Fastmac technology to Cisco Systems in 1990.
Madge made his first major error of judgement when he spent a huge pile of money on ATM development with several cutting edge microprocessor development teams in his Sefton Park R&D lab. He was quite convinced this was the rich stream that he could mine a la Token Ring, but it was a different game that was never going to beat ethernet's expansion capability or cost.
The company's revenues for 1990 reached $18 million. One year later, Madge's revenues nearly doubled, to $34 million. The rise of computer networking, however, had only just begun to be seen. By the following year Madge's revenues would near $100 million. At the end of 1992 the company had managed to increase its share of the Token Ring market to seven percent--still minor compared with IBM's 76 percent share. Yet Madge continued to build momentum, as IBM struggled to keep up with advancing technology. Until the early 1990s, Madge had been focusing on producing adapter cards, which were fitted to individual computers to connect them to the network; the company's expanding product line soon included the hubs and switching components needed to route data and allow the adapter cards to communicate.
Madge Networks would rise rapidly through the 1990s, boosted by the boom in computer networking and by its own leading Token Ring technology. Madge successfully chipped away at IBM's Token Ring market lead, building Madge's share to more than 16 percent by mid-decade. Overall, IBM's market share quickly dropped below 50 percent--a movement aided in part by licensing agreements between Madge and networking specialist Cisco Systems.
In the 1990s Madge continued to expand its international presence, opening new offices in Germany, Hong Kong, Japan, and France and building its San Jose office into a second headquarters. To fuel the company's growth, Madge Networks went public in 1993, offering more than six million shares on the NASDAQ stock exchange. By 1994 Madge Networks' revenues had topped $213 million, an impressive growth, but still minor in comparison with its main market competitors, Cisco Systems, 3Com Corp., Bay Networks, and Cabletron Systems. In addition, many Fortune 1000 companies sought a broader range of networking products than Madge could offer. Although Madge had performed well in the Token Ring arena, its Ethernet capability was lacking - even as Ethernet became the networking technology of choice in the mid-1990s.
In 1995 Madge Networks and Lannet Data Communications, an Israel-based networking specialist with a focus on LAN switches for Ethernet-based networks, agreed to merge operations in a stock swap valued at some $300 million. Lannet's operations were merged into Madge Networks, creating Madge's Ethernet division. With combined revenues of $283 million, Madge and Lannet were the smallest of the top five networking market leaders, but the combined company's product line offered a complete array of Token Ring and Ethernet products.
The merger gave Madge the ability to combine the rival networking technologies into hybrid systems and the capacity to bridge the company's products into the latest networking technology, ATM, or asynchronous transfer mode. By the mid-1990s companies were straining the limits of the existing networking technologies. As corporations joined more and more of their work force to the company network, their networks quickly ran short of bandwidth for transmitting data. The arrival of new networking applications--in particular, video conferencing and video data transfers, not only pushed bandwidth needs to the extreme, but threatened to cripple networks entirely. ATM's more efficient use of packet technology offered the prospective of dramatic bandwidth gains. Adoption of the technology would require corporations to rebuild their networking infrastructure, and Madge Networks readied not only its own ATM products, but also the hubs and switches needed to bridge existing Token Ring and Ethernet equipment to the new technology. The Lannet merger enhanced Madge's portfolio of LAN switches, needed to connect Ethernet and Token Ring stations to corporate ATM installations.
Aiding Madge's growth was the 1995 agreement with Cisco Systems, by then global networking leader, to incorporate Madge's Token Ring switches into Cisco's products and to license other parts of Madge's Token Ring technology for future Cisco designs. At the same time, Madge gained access to Cisco-developed LAN and WAN switching software. Following on the Cisco agreement, Madge also prepared to step up its manufacturing capacity, with a new facility in Ireland.
The Madge-Lannet combination seemed to be the right match: by the end of 1995 the company, now with some 1,400 employees, achieved revenues of more than $400 million, all but 15 percent coming from outside its U.K. base. The company entry into 1996 continued its expansion efforts, including adding to its Israeli manufacturing capacity with a new $10 million plant in Jerusalem. In February 1996 Madge moved to plug another hole in its product line with the acquisition of Teleos Communications Inc., bringing that company's ISDN and WAN access products. Based in Eatontown, New Jersey, Teleos, which posted revenues of $24 million in 1995, cost Madge $165 million in a pooling of interests transactions. At the same time, Madge again deepened its relationship with Cisco Systems, broadening the company's licensing agreements to include Cisco's IOS software. Sadly this agreement never extended beyond the Sefton Park R&D facility and few customers were even aware of it or ever saw benefits from it, niether did their own support engineers.
At the end of 1996 Madge rolled out a new line of products to enhance its portfolio and bring the company into a new and increasingly important market: video conferencing. Madge's products placed the company in position to offer bridge solutions between the formerly independent data and video transmission technologies. Although the video conferencing market had yet to mature, Madge's move appeared to place it firmly near the lead to compete for what analysts considered a future boom market. Sadly Madge was confused - grasping at technologies that it had no grip or understanding of.
Yet, for the short term, Madge's growth was slowing. After years of strong expansion, the company's revenues for 1996 reached only $482 million. In 1997 the company began posting losses; analysts suggested that the company, in attempting to broaden its product line, had lost its product focus. By August 1997 the company was forced to restructure, laying off some 650 employees. During the mid-1990s, Madge had attempted to transfer the bulk of its headquarters operations to the United States, building up employee capacity around its San Jose offices. The market decline of ATM technoology and a panic management reactio to the 97 losses, however, proved difficult for the company to overcome; the choice was made to concentrate the company's activities in the similar England-Israel times zones, and the company's U.S. offices were scaled back. This was after turning down the generous Cisco $880 million offer in 1997.
Madge's restructuring continued to occupy the company into 1998. In late 1997 the company spun off its Ethernet division into a separate subsidiary, once again named Lannet. After denying early reports that it was looking to divest its Ethernet business, Madge agreed to sell Lannet to Lucent Technologies for $117 million in July 1998. During this period, Madge also moved to exit the manufacturing business, selling its Ireland plant to Celestica, an electronics contract manufacturer. The total cost of Madge's restructuring passed $50 million, but the company's renewed commitment to Token Ring technology appeared to have stabilized the company's balance sheet. By mid-1998 Madge had once again returned to profitability. Mostly because it only had 50 or so Employees by now.
In the late 1990s Madge's attention focused on developing the next-generation Token Ring technology, High Speed Token Ring, offering scalable bandwidth from 16 Mbps (megabit per second) to 100 Mbps, with future speeds reaching into the gigabit ranges. Abandoning ethernet was very not the smartest business move anyone ever made either and marked the beginning of the end for Madge Networks - a move capped by the zero return on the ATM investment dollar they had bet the farm on - something they would never recover from. Post 98 they transformed yet again in a weak attempt to regain the glory days with wireless 802.11 technology, but were dismally late to the party yet again.
All that remains of their stunning Token Ring glory days are memories, photographs and assorted news clips recording the passing of Madge Networks N.V.
