Businessweek Archives

To Get Along, Banyan Learns To Go Along


Information Processing

TO GET ALONG, BANYAN LEARNS TO GO ALONG

When a trio of engineers left minicomputer maker Data General Corp. in 1983 to form Banyan Systems Inc., they were absolutely right in identifying what would become the key computer technology a few years hence. No question--local-area networks are hot. While the minicomputer market has crashed and the personal computer market has slowed, the business of tying desktop computers into networks has continued to expand by 30% annually.

Problem is, Banyan has relatively little to show for its prescience. Its basic networking system, called Vines, was--and remains--an impressive bit of technology. That helped the startup snag important corporate customers in the 1980s. But the power of Vines was wasted on most network buyers, who were willing to settle for a simple program that lets a few PCs share files and use the same printer. For them, Novell Inc.'s NetWare was just fine. The result: Novell has a commanding 63% share of the $1 billion market for PC network software, and Banyan has just 7%. Microsoft Corp., meanwhile, sees networking as a top priority and is investing some $50 million annually to expand its 7% market share.

JOIN 'EM. Can Banyan avoid getting squashed by these battling giants? The answer seems to be yes--if the Westboro (Mass.) company can manage to coexist rather than compete head-on. There are signs Chief Executive David C. Mahoney is doing just that. He's hiring new executives and pursuing a plan to focus on advanced "services," such as electronic mail management, that will work on Novell and Microsoft networks, as well as its own.

To fund this new if-you-can't-beat-'em-join-'em strategy, Banyan on June 29 filed for a long-anticipated initial public offering. It is hoping to raise $28 million to pay back venture capitalists and to finance development and marketing of the new services. Citing legal restraints related to the IPO, Mahoney and other Banyan executives declined interviews with BUSINESS WEEK.

If Mahoney can pull it off, the new course may be Banyan's best bet to restore revenue growth and profit margins (chart). Both slumped as Banyan tried to battle Novell. The new plan "will set Banyan apart from competitors," says Jack T. Atwell, president of Trellis Network Services Inc., which markets both Banyan and Novell software. Another advantage: Because Banyan's most advanced software will also work with NetWare, customers won't have to worry about relying on a small fry for basic network technology.

Already, a truce with Novell is in the works. The two are discussing how their networks might work together, confirms Jan Newman, a Novell executive vice-president. Novell's customers would gain critical technology that Banyan has developed for its networks. Called StreetTalk, it allows PC owners to call up files easily and tap into vast resources on networks comprised of many different types and sizes of computers. That's crucial to corporations that hope to run themselves on far-reaching networks.

NICHE-BREAKING. Despite StreetTalk, Banyan lately has lost some of its earliest and most influential customers to Novell. Arthur Andersen and Fidelity Investments have both decided to standardize on NetWare. And Vines loyalists such as Dick Schell, information services director at construction company Turner Corp., say Banyan must change. "They need to break out from their niche and redefine themselves," says Schell. In doing so, Banyan could seize a big opportunity. Forrester Research Inc., a market researcher, estimates that sales of software for advanced network services will more than double this year, to $205 million. These services include smarter ways of managing vast quantities of files, electronic mail messages, and even video images. Some packages handle links with mainframes.

To help craft the new strategy, Banyan last month named Peter Hamilton, a former Hewlett-Packard Co. executive, as its chief operating officer. For him, a critical assignment will be reorienting what has been Banyan's combative approach to marketing. Its calling card was a broadside at the market leader titled: Things They Don't Tell You at Novell Presentations. Banyan has also been trying to sign up the small local companies that sell and install most of Novell's software. But now that its cold war with Novell is ending, Banyan must learn how to win the peace.Gary McWilliams in Boston


Burger King's Young Buns
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus