An Entertaining High Wire Act?

With wireless LANs now quite common in many small and medium businesses, vendors have been searching for new applications to run on top of them. Real-time location services (RTLS) enable companies to track items, such as their inventory, via wireless connections, and one wireless LAN supplier bet heavily on its future.Trapeze Networks, itself a subsidiary of Belden, acquired acquired Newbury Networks, a supplier of RTLS systems. The startups Location Appliance let companies use 802.11 access points to track, monitor, and manage a range of corporate assets, such as portable heart monitors in a hospital, equipment or supplies in a warehouse, or containers in a shipyard. In addition to monitoring device movement, Newburys systems also offer security features, so companies can rely on location data to identify and block potential wireless attacks.

Wireless LAN suppliers understand that hardware margins have been shrinking as the market has been maturing. In response, they have been searching for new applications and services to generate revenue. International Data Corp. views RTLS as an area with potential: the market research firm expects revenue to top $1 billion in 2011. By purchasing Newbury, Trapeze is trying to stake out a leading position in the field. The company has some experience with Newbury. The WLAN supplier has been OEMing the startups products since 2006.

The success or failure of the acquisition will rest on a few factors. First is the assimilation of Newbury into Trapeze. At least for the moment, no major changes are planned. Newbury will operate as an independent business unit, the startups 16 employees will remain, they will continue to support its current OEM and channel partners from its headquarters in Boston, and company president Michael Maggio will report to Trapezes Jim Vogt. The vitality of Newburys product line will also play a role. The company touts Apple, HP, and Lutron Electronics among its customers. Next is how well Trapeze  as well as folks like IDC  have analyzed the markets potential. Last will be the reaction of Newbury OEM partners Meru and Nortel, who may rethink their allegiances in light of the acquisition.

Small and medium businesses have been ways to leverage their wireless LANs and vendors have been responding. The Newbury acquisition could be the first of several from Trapeze, which is now part of a deep pocketed network equipment vendor. Since the company has aggressively gone after the RTSL segment, the question arises: How will its competitors react?