Enterasys sues rivals for patent violation

Analysts believe that a lawsuit filed against Foundry and Extreme is a diversionary tactic that's unlikely to succeed

Enterprise LAN vendor Enterasys has filed a patent suit against rivals Extreme Networks and Foundry Networks, which one analyst sees as a sign of desperation by a company experiencing poor results.

Enterasys claims Foundry Networks and Extreme Networks have infringed six patents, some of which cover virtual local area networks (LANs) and multi-protocol routing. Neither Foundry nor Extreme have yet made any public response to the claims.

"I get the impression it is trying to focus attention on other things than the health of the company," said Peter Hulleman, senior European research analyst for telecommunications and networking research at IDC. "Enterasys is basically fighting for survival."

Enterasys certainly has plenty of things to distract attention from; it recently announced plans to close its New Hampshire offices, formerly the headquarters of its ex-parent company, Cabletron. In May, it announced plans to cut 30 percent of its staff (300 people), after disappointing results.

In the first quarter of 2005, Enterasys made a $10m (£5.5m) loss on a turnover of $90m, and its revenue has been decreasing over recent quarters according to Hulleman, who warned that "their performance is worsening."

The LAN switch market is due for a shake-out, Hulleman predicted, as the margins have become smaller. "Cisco is still earning megabucks, but the rest are struggling," said Hulleman. 3Com is also losing money, but starting from a larger base, and with a strong performance amongst small businesses.

Enterasys’ efforts to distinguish itself -- with the brand 'the secure networks company' -- has not cut much ice so far, since security is a basic requirement not an extra. "It’s hard to stand out of the crowd with this," said Hulleman. "They have a good security solution, but do you win a lot of market share with it? I don’t think so."

Hulleman also thinks it's unlikely that Enterasys’ suit will distract the industry from these issues. Firstly, such a lawsuit focuses industry minds on problems at the company: "It was the first thing I thought of," said Hulleman. Secondly, it probably won’t actually get them any revenue. "In my view it is only the lawyers that benefit from this," he said.

Enterasys is being represented by law firm Robins Kaplan Miller & Ciresi, which also represented Eolas, which sued Microsoft over alleged patent infringement in Internet Explorer.