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Tech M&A: Enterprise Wars as Dell and Intel Move Into New Markets


A double dose of bad news for Cisco this week, as Intel moves to disrupt routing and switching while Dell seeds its cloud computing efforts.

Cisco, Beware: Intel To Disrupt Another Market

Intel (INTC) believes it has found a market to dominate and can dramatically lower the costs of very expensive high-end switches and its acquisition of Fulcrum Microsystems signals this intention. Fulcrum's flagship products are its FocalPoint switch chips for very high bandwidth 10GbE and 40GbE routing and switching. The target markets for these costly chips are telecommunication service providers, carrier networks, data centers, and large enterprises.

"Fulcrum Microsystems's switch silicon, already recognized for high performance and low latency, complements Intel's leading processors and Ethernet controllers," Kirk Skaugen, general manager for Intel's datacenter group, said in a news release.

Uri Cummings and Andrew Lines founded Fulcrum in 1999 and are expected to stay, as are most of Fulcrum's employees. They are expected to transfer to Intel and work in the company's data center group.

High-end switches carry a huge margin -- much like high-end servers did when they were proprietary. This is a market dominated by Cisco (CSCO), and is the backbone it built much of its success upon. When Intel enters a market it changes the market dynamics, and its intent to lower the costs and increase volumes most likely will hit Cisco hard.

Not a good week for Cisco after previously announcing it's laying off more than 10% of its worldwide staff.

Deal Deets: Intel did not disclose the price it paid for Fulcrum.

Dell Getting In on the Data Center Business

In further bad news for Cisco, another tech giant moving away from traditional hardware offerings is Dell (DELL) as it announced their acquisition of Force 10 Networks, an enterprise networking company that focuses on data center solutions. With $200 million in revenue and presence in over 60 countries, Force 10 delivers technologies like open cloud networking, which provides massive scalability, customization, and cost savings.

Long thought of as only a hardware player, Dell has been very aggressive with its acquisitions of late. After losing a ferocious bidding war with HP for storage vendor 3Par, Dell purchased Compellent, another storage company, at the end of last year.

This expansion to the cloud with virtualization, storage, data centers, and other platforms signals the seriousness with which Dell is treating its diversification efforts. This move also strengthens Dell's server capabilities, allowing it to position itself as a provider of data center products and services. Similar moves are being made by Cisco and Hewlett-Packard (HPQ) for the ever-expanding battleground of cloud services.

This is a solid acquisition by Dell and should lead to more opportunities for new clients. However, there's always the very real danger of making too many acquisitions and never being able to full integrate new and sometimes competing technologies. For proof of this, just take a look at Cisco's problems, as it has strayed too far from its core markets in its rush to diversify.

This is another in a trend of huge tech companies buying smaller startups, and the trend doesn't seem to be running out of steam anytime soon.

Deal Deets: Terms of the transaction were not disclosed. The deal is expected to close in late summer. Dell says it plans to keep Force 10's existing operations in the US and Chennai, India, and keep growing the business.

Adobe Buys EchoSign, but Not Without Some Drama

Adobe (ADBE) announced this week it had acquired EchoSign, a company that provides end-to-end solutions for handling the electronic signing of digital documents.

EchoSign is a Web-based provider of electronic signatures. The technology will be integrated into Adobe's document exchange services platform to ensure secure delivery of documents for universal access, review and approval. The idea is to finally bring the dream of a paperless office to fruition. Long predicted, the rally for paperless offices is a hot topic again with many businesses taking the environment seriously

EchoSign launched its first product in 2006 and is now on version 10 of its technology. All 35 employees will join Adobe.

"Dozens and dozens of Fortune 500 legal departments use us," EchoSign founder and CEO Jason Lemkin told Law Technology News.

"I designed it based on my experience as a pretty bad practicing corporate attorney. One of the things I was terrible at was tracking and managing," Lemkin joked.

Last year Adobe acquired enterprise content management vendor Day Software. Adobe has integrated the Day technology into its expanded Digital Enterprise Platform (formerly known as LiveCycle) product. Adding digital signatures is a smart move.

But the deal is not without its issues. A competitor, RPost, filed suit against both EchoSign and Adobe for intellectual property violations.

"We did not anticipate Adobe's acquisition of EchoSign," RPost CEO Zafar Khan told PC World. "The timing was a surprise as RPost had engaged in discussions with Adobe just a month ago in the context of proposing a collaborative product alliance."

"Had Adobe delayed a week, we would have filed against EchoSign," Khan said. "Since they chose to acquire the technology that we deemed to infringe, we included Adobe in the suit."

Adobe said Tuesday that it does not comment on pending litigation.

Deal Deets: Terms of the sale were not disclosed.

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