Sonoma County: News and Notes

Two weeks ago, I told you that I would focus this week on some tips for my friends at Cyan on being acquired. Being acquired is neither good nor bad. It simply is. About the only surety that one can have in being acquired is that there is change coming. That is where I will focus most of what I say.

The challenge is that before I do that, I need to remind everybody that employment is a business arrangement. You trade your time and skill for money. There are likely other things that you get out of working at a certain place, but those are more abstract. And they are the things most likely to change in an acquisition.

First, there will be those that leave at or shortly after the deal closes. A company does not need 2 CEOs or 2 CFOs. Those people are aware of that when these deals happen and are getting a handle on how long they are desired to be around post the close of the deal. Less explicit will likely be the “synergies” gained in G&A. The number of transactions that occur in Finance, for example, will not change that much for the Ciena Financial team when Cyan is added. Cyan will represent about 6% of the total revenue of Ciena. So, there will be work to integrate the systems and then many of the G&A people will be let go.

Groups like Customer Service, Marketing, and Sales will take longer to settle. There will still be a large overlap between the companies. There are only so many carriers and both companies will be calling on many of the same ones. Here a great guide to what will happen is to examine what happened in past Ciena acquisitions. Ciena has bought many companies over the years. The Wikipedia article on Ciena lists a large number of previous acquisitions. Some of those acquisitions transformed Ciena (for example in the Optical Crossconnect space). Other acquisitions failed (like in the DSL space). But the good news is that there is a track record and employees can research how these proceeded.

Finally, there will be the people directly related to product development. Clearly the acquisition is primarily about Blue Planet. Really the question is about the other products. Ciena has products that compete and complement the Cyan box portfolio. There will be a rationalization of R&D spending. I can’t tell you how that is going to come out in the end. What I can tell you is that there will not be a lot of R&D spent on directly competing platforms.

Which brings me back to the “Business Deal” part of employment. The people making decisions about how things are going to change are primarily on the Ciena side of the deal. That means decisions that have been made in the recent past or might be made in the near future can be changed. So, as an employee you have to judge what the deal brings to you personally. The deal is good for Cyan as a company and for its shareholders. But nobody is examining what the deal means for your career. It is simply not part of the deal calculus. So, it is imperative that you do that.

What can you do? First, be objective about how decisions are going to be made in the combination. That means studying what happened in past deals. This is especially true for recent deals (World Wide Packets and Nortel Metro Divisions are the most recent). Second, you can do some research on who is going to be inserted into your management chain. You can use Social Media (LinkedIn, Facebook) and Google to learn what they are like. You can connect to past employees and friends to see what they know about the people that are being thrust into your life. You can study Ciena’s plans. There are a number of documents available on-line. Take a look at the Ciena Career section. See if there are jobs that are being opened that you might want to do. Because this can be an opportunity as well as a problem. Ciena will open career choices to you that you might not have had in Cyan.

So, study – have a plan – take charge of your career during this transition and good luck!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Net Neutrality Friday

As we head into the long Memorial Day weekend, this gives me a chance for some reflection on where we are and how we got here.

For me, it starts in 1968 with the Carterphone decision. This allowed people to hook up non-AT&T devices to the phone network. In those days, most of us had to buy or lease equipment from Western Electric (which became Lucent). This decision opened up what became the Telecom Equipment market to more competition and helped spur development of networks.

Then in 1984, we had the breakup of AT&T into Local (what we call the RBOCs), Long Distance (what we called AT&T) and Equipment (Lucent) arms. This had the consequence that the architects of the phone network (inside of Bell Labs – part of Lucent) were no longer in the same company as the operating divisions of the network. The same was true with Telcordia which turned the Bell Labs architectures into specifications.

In 1996, we had the update to the Telecom Act. This created an entire new class of Telephone company – CLECs. These competitive carriers looked to be one possible driving force for that new fangled thing called the World Wide Web, which entered the consumer lexicon in 1994. It seemed that the CLECs and other new Fiber Carriers were going to revolutionize the way that networks would be built.

Now if I take a look back at what actually happened, the Carterphone decision created an entire industry in the US. There were many new businesses spawned because the phone network was opened up. Jobs were created and in general things moved forward at a more rapid pace.

The breakup of AT&T ended very oddly. The winner was supposed to be the Long Distance arm. This faded over the years and at this point nobody remembers having to pick a long distance company or that international calls were dollars per minute. The equipment arm got in extreme trouble (wait until the telecom act) and is now part of Alcatel-Lucent (which has a pending merger with Nokia). Telcordia became part of Ericsson. The big winners were the Local Arms, which began to consolidate and are really now in 3 pieces: Bell Atlantic and NYNEX are Verizon. SWBT, Ameritech, Pacific Bell and BellSouth are all part of AT&T. US West is part of Centurylink. Nobody expected that outcome at all.

There are still CLECs and new Fiber Carriers. The Internet is going strong. But this combination created an equipment bubble that we are now just about done sorting through. Many of the traditional equipment companies used their cash to try to help fund these new Carriers through Vendor Financing. These equipment vendors lost their shirts and the outcomes can be seen in what happened to Nortel, Lucent, and Marconi among many. Lots of startups came and went and essentially ended the hey day of telecom equipment startups. Investors lost huge sums in fraud and stupidity in many of these deals.

And so here we are today with the fight over Net Neutrality front and center. As many of my readers know, this is not something that I fought about strongly. I want a neutral network, mostly because a non-neutral network is bad for business. But worse than this, I think it takes our eye off the real ball. How do we grow investment in the network so that everyone has lots of low cost bandwidth available to them. I think we played our government card this year and will be some time until we can play it again.

But no matter what happens, there will be unintended consequences. Keep your eyes open for them. They are often great business opportunities.

Happy Memorial Day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Sonoma County: News and Notes

I was able to get up early this morning since the Warriors game ended early since it had to fit into a National TV schedule. And now, I have to write my review of Keysight’s Q2 Results. Ah well.

So, the numbers in Q2 (note they are not using the Calendar Year as their quarters) were okay. Not great but okay. Revenue was $740M and non-GAAP Earnings Per Share (EPS) was $0.70. And the stock is down considerably this morning to $32.50 a share. The reason is the forward looking guidance that the company gave and some of the comments provided by Management on the call.

The company has reported that future orders are soft and that (all numbers at the mid-point of guidance) Revenue will be $655M and EPS will be $0.44. Those numbers are dramatically down. The basic notes were that this was due to problems outside the United States, particularly in Russia. It was not stated that China was also a problem, but the numbers in Asia-Pacific outside Japan were down as well. China is the big bully in that block of countries. The communications business is down generally where aerospace/defense is up.

Well, in the long term all of that is a problem because the growth areas for the company in its own investment presentations lie outside of aerospace/defense. This means that the company is looking at either a market or competitor problem. Either way, it will struggle with organic growth. Certain sectors of the company are growing, but they are being offset by those parts that are troubled. The good news is that the existing business is highly profitable, so there is time to make changes. We are talking about a business that generated $68M in cash in Q2. The question is how it will be deployed.

One other announcement on the call. That is that Keysight will be looking at reducing costs going forward. The most significant of that is a Voluntary Early Retirement program. This is one of these things where companies don’t want to do a layoff, but will try to encourage a reduction in headcount. There are 2 problems with these programs. First, you can not control who takes them. That means that employees that are still have some Entrepreneurial Spirit tend to jump on them. Those about to retire and don’t want to go do something new tend to stay. Just as an aside, these are normally followed up later by real layoffs. If you are thinking you might want out and are eligible, then take the plan. Have them pay you to leave instead of being forced out later.

I think the telling part of the call and one that I think anyone interested in investing should listen to is the part where an analyst asks about what the company is going to do with the Cash it generates. The CEO answered that they were likely to deploy it to grow the company. The problem with that from an investor standpoint is that the market that the company is in is stalled. So, investors in the company will be doubling down in a market that is stuck. What investors would prefer is to either return cash to the shareholders (dividend) or reduce the number of outstanding shares (buy back). Keysight Management has not shown (and they can’t have to date given the short run of the company) that they are effective investors of the money. As a cynic on corporate governance, investing in the business does support management and ensures their future employment.

Well if you are either a Keysight Investor or Employee, there was lots to think about. I strongly recommend you listen to the call if you are in either category. There is a recording of the call on the Keysight website.

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Your Branding Message: Wrapping it All Up

So, we have taken a look at the last few week on the broad impact that a Brand Message can have on Your Business. I want to go back and align things to ensure that there is clarity for my message.

I will start with Your Brand which is: Your Unique Value Proposition (UVP) as viewed by Your Ideal Client. Also, recall Your Brand Message is “The Promise that You make to Your Prospects on becoming Your Customer.” Those are my organizing principals here. It is all about the message that you communicate.

Looking back up the chain of logic, this means that you must be clear on both Your UVP and Your Ideal Client. Without understanding these two items, you are likely to have a problem in creating Your Business. You will spend resources trying to sell products and services to prospects that are not the best fit. I see this all the time in businesses. They spend considerable energy and money trying to close on prospects that are not the right fit. There are plenty of reasons for that, but the biggest is not knowing who you want to sell to and why they will want to buy.

Looking down the logic chain, Execution comes into focus. Are you and your employees meeting the Brand Promise every time? If not, then you have to change that. This is what Brand building in the real world is all about. Meeting and exceeding the expectations of your customers. You made them specific promises and now it is time to follow through on them. That is what will build your reputation and thus your Brand.

Along with Your Brand are all the ways that you promote yourself. Are these ways compatible and positive for Your Brand. These promotions have to align with what you want both Your Brand and Your Brand Message say about you as well as your products and services. To be clear about promotions and promoting, I do not mean Coupons. I mean Marketing in whatever form you choose. That can be anything from Referrals to Telemarketing. You need to Assess whether this fits with your Brand.

For example, this is a Marketing piece for me. If you read what I write and like it, you are more likely to consider hiring me and my firm to work with you. I am writing in the form of providing Education and Information, but I hope you all realize that there is more to me than just the writing. My job is to apply the principals that I have given you (and others) to You and Your Business. If I help ensure your success and growth, then we both win. I get a client and hopefully a friend. You get to achieve your goals and hopefully make a friend as well.

So, how does Blogging fit with my Brand Message? Well, for me it is all about giving you tools. There are many parts of Coaching that I can’t really do in a Blog. But there are some things and that is all about making you think about Your Business and how you will achieve Your Goals. If even one person gets thoughtful about what they do and why they do it, then this post is more than worthwhile.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Net Neutrality Friday

Well, this week there were some legal maneuvers on the Net Neutrality front. The Cable Companies through their lobbying arms are trying to stall the implementation of Title II. The FCC said no and now we are at the courts. I suspect the courts will say yes at least temporarily. In the long term it should not matter, unless things take all the way until the next election. At that point, the FCC might have a change in leadership and direction. I am not sure that a stay will be in place that long but we shall see.

On Wednesday, I reviewed the¬†purchase of Cyan Optics by Ciena. I will not review the details of this but want to focus on the technology involved. The reason that Cyan was purchased was a technology called “Software Defined Networking” (SDN) and Cyan is an early mover in that market. Paired with another technology called “Network Function Virtualization” (NFV) service providers are trying to build a more “agile” infrastructure. It is still unclear how these markets are going to evolve, but they are important trends.

Much of this work comes from what is going on in the IT Business. There is a trend for service to be much more Web oriented. This goes from programs using Web Technologies to provide their User Interfaces all the way to Software as a Service (SaaS) products. You may think you are unaware of these changes, but think about your E-Mail. Most PC’s shipped with Outlook Express from Microsoft. That is what is called a Mail Client and provided a User Interface to your E-Mail. If you use the Webmail client of software like GMail then you have experience with SaaS.

All of this is changing the way that products and services are used to create Service Provider Networks. It is also changing the way that we use these services and relate to our Service Providers.

In the IT realm, the notion of Virtualization exploded with Amazon Web Services (AWS). Even though Virtualization (and what Engineers at the time meant by “The Cloud”) existed before AWS, it is the advent of AWS that changed lots of things. Amazon took the software that it makes to make Amazon.com and allowed 3rd parties to take advantage of this capability. They rented computing, storage and bandwidth in a way that allowed customers to start small and scale up their infrastructure as they need. AWS clients can reallocate resources as they want to different functions and capabilities.

Well, network companies want that same capability. This means that things are going to be a bit interesting for a bit of time and price and value changes. There are significant issues to work out with the technology and lots of different ways to make this work. One thing that might happen will be the rise of service providers that are completely “soft”. The value that they provide is always on demand and ride on top of other’s infrastructure. Net Neutrality as implemented may allow for or may destroy these kind of Service Providers (if you can’t get a specific kind of bandwidth some kinds of services are not possible).

So keep your eyes open and see what kinds of new providers come to be!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Sonoma County: News and Notes

First, I want to thank everyone who stopped by my booth at the Santa Rosa Chamber Business Showcase. It was great to chat with old friends and meet some new ones. Attendance seemed very good and there was quite a positive vibe to the people that were there. Whole bunches of Economics is actually more emotional than logical, so I will take that as a good sign.

Well, it is time to chat about Cyan Optics. They reported Earnings last week and they were better than Q4. Revenue was $36M and Cyan lost a bit over $10M. Still a big negative to the cash flow, but for the most part these results don’t directly matter.

The reason was the other news announced in parallel. That is the proposed purchase of Cyan by Ciena for about $400M. The number is not fixed at this point and we will get to that as we go through this post. This is not Ciena’s first venture at buying companies. Ciena has been doing it for years. In fact when I was promoted to the CTO of AFC, Ciena was evaluating a purchase of AFC. This didn’t happen because of the type of sale that both that transaction and the current one are.

So, let’s talk about this first. This transaction is primarily a stock swap. That means at the close of the transaction Cyan shareholders will receive value of 0.224 shares of Ciena Stock. 90% of this will come in the form of stock and that is the challenge here. If the value of Ciena stock declines, the value of the deal declines. So although the press release declared the deal at $4.75 per share of Cyan stock, this will change until the actual deal happens. When Ciena and AFC talked, AFC stock climbed and Ciena stock declined to the point that the proposed deal did not make sense anymore. So, it was halted.

I don’t expect that to happen here. One thing that you can keep an eye on is the Cyan Stock Price. If investors think that the deal will not go through, expect a significant decline in Cyan stock. But today, the whole market is convinced it will go through. Part of the reason is that Institutions and Insiders own 68% of the shares. Presumably they are in favor of the deal so that votes by anyone else does not matter. In fact, Insiders own 48% of the stock today. They probably own a bit more than that as they will likely exercise their conversions and warrants from the notes issued in December. Just FYI, I would expect this deal to close in August or September based on the need for Voting. But that should be rather a formality.

There are several law firms trying to generate lawsuits over the price. I am amused by that as this looks to be a good deal for Cyan. The price is well over 2x Sales and was at a 30% premium to the stock price before the deal was announced. Strategically, the two companies are a good fit. All I can say is that you should check out the law on this now, Tellabs won a Supreme Court case on this a few years ago that might make you think twice before signing up.

I would say the one sour note in the acquisition is that the people that provided funding in December just got a very nice Windfall. They received a blended price of $3.15 per share between the Coupon and the Warrant. A $4.75 share price gives them a gain of around 50% in less than 6 months. That is outstanding returns and was not available to the general shareholders.

Okay, well next week I will review Keysight. The week after I will do a special report on being acquired for those employees at Cyan.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!

Your Brand Message: In Practice

I had a couple of opportunities last week to discuss Branding with clients. I thought it might be useful to talk about real world challenges that Small Business Owners face. Both of these examples come from my view that Brand and Brand Messaging has to do with Execution in the Business.

The first example comes from a firm in the Marketing Business. This is a Business owned by a Couple and they are the primary actors in the Business. We are working on re-positioning the Business to serve a higher end clientele. The challenge is that the more technical of the partners comes from a background and experience that is contrary to the kind of Brand they want to develop. This has caused some customer confusion and loss of potential business. I wanted to give them some concrete steps on how to make a change.

As usual, I fell back to Automobile companies. They make such wonderful examples in Branding because of the variety and breadth of examples. I asked the person to describe to me someone dispatched from the company to deal with a car issue. In one case, the car was a Rolls-Royce. In the other, it was a VW Bug. He gave a description of the different people that would show up. I pointed out to him that neither was right or wrong. They simply were and that is okay. The two people they described were very different and we talked about the differences.

Next, I asked them about some companies that they respected in their business. I got some answers and asked how my clients differed and how they wanted to work within their business and what image they wished to project. I think the client got it at that point. They get to project any image that they choose. But they do get to choose it and they need to be consistent about it.

Later, I met a client in the Construction Business. They had the problem that many of the employees did not demonstrate the same values that they did. We talked about that. I started by suggesting that he make sure that all the employees know what his differentiation is. This is all part of his Brand Message to prospects and clients. If his employees are not clear on the Brand, then they need to be as they are customer facing on a regular basis. We went through the exercise of going from the Lead Generation from following through on the Brand Message all the way to their paychecks. I hope to hear positive results at our next meeting.

I hope seeing Branding and the Brand Message in action helps. Everybody has challenges and with just a bit of effort we can make things much clearer and better for our customers.

Jim Sackman
Focal Point Business Coaching
Business Coaching, Executive Training, Sales Training, Marketing

Change Your Business – Change Your Life!