'

Q&A: Dennis Hayes on mega-mergers

On Tuesday, modem pioneer Dennis Hayes talked to PCDN in an exclusive interview covering his views on mega-mergers, 56kbps modems and the future of his company.

Hayes recently agreed to buy Cardinal Technologies, 3Com is buying USR, and now Ascend is buying Cascade. What's behind this spate of merger activity in the networking and communications business?

I think it's a time when a lot of companies in the industry realise economies of scale and consolidation make sense. Cardinal has lost money for years, for instance. By closing their factory they will become immediately profitable. Almost all [networking and communications] companies are doing business globally so doing things like consolidating offices makes sense. There has to be overhead to go out of the equation.

Beyond that consolidation of offices and so on, do you think these mergers make sense?

The client side of US Robotics complements the LAN side of 3Com. It creates an interesting combination. The remote access of Ascend complements the switching of Cascade [although] it's a pretty high price to pay [so high a multiple] of their annual revenues.

There are two types of acquisition that make sense today: the Hayes way of folding [the bought company] into its operations, and adding products to the line.

Do these multi-billion dollar mergers spell danger for companies the size of Hayes and smaller?

Not necessarily. Companies have to decide whether they're going to be the consolidator or the 'consolidatee' [sic] and there will always be niches. We're interested in making further acquisitions where they make sense to us.

These big mergers are about getting access to different markets. Do you feel the need for Hayes to look at related markets that it isn't used to playing in?

We're already doing that by partnering with companies with core activities in things like remote access. It's not always necessary to acquire a product or a company. You can license to get a leg up in a business.

More follows