Another Tech Loss for Michigan?

Earlier this week Texas-based Tektronix Communications announced it had acquired Arbor Networks, which makes software for network security and management. Arbor Networks employees about 90 people in Ann Arbor and 270 world-wide. According to Xconomy.com-Boston. Farnam Jahanian, who is chair of computer science and engineering at the University of Michigan, formed Arbor Networks in 2000 with Rob Malan, who was Jahanian’s Ph.D. student at the U-M and is now Arbor’s chief technology officer (he will stay on as CTO).

Arbor Network’s core technology, based on Malan’s and Jahanian’s research, involves software that monitors entire computer networks, from data centers and Internet service providers to broadband customers and mobile interfaces. According to the article, the firms products protect its customers against all manner of security threats, most notably, denial-of-service attacks that can shut down big networks and popular websites. Jahanian and Malan’s team raised a Series A venture round in 2000, led by Battery Ventures and Cisco Systems, and then a Series B round in 2002, led by Thomas Weisel Venture Partners. Those two rounds, the only outside funding taken by the company, were worth about $33 million.

Arbor CEO, Colin Doherty, told Xconomy.com-Boston that Danaher (NYSE: DHR), a Washington D.C. based technology conglomerate, owns Tektronix Communications. According to Doherty, Arbor will stay “whole and intact as an operating unit under the Danaher brand.” The company will become part of Danaher’s communications and enterprise group which comprises a half-dozen companies, including Tektronix Communications, Fluke Networks and AirMagnet.

TektronixArbor will give its new parent company deep Internet security knowledge, what Doherty calls a “security beachhead.” Now “they can detect, secure, and mitigate network security. It was a really good fit for them,” he says. Doherty told xconomy.com that with Danaher’s size and influence, “it’s a unique opportunity for us to change our model…and be part of a larger public vehicle.” Financial terms of the deal weren’t disclosed, and the principals at Arbor and Danaher weren’t saying much beyond the platitudes that typically follow such a merger.

For his part, Jahanian who is exiting the company calls the Danaher acquisition as a natural next step in Arbor’s broader evolution. “It’s another inflection point,” he said in the article, and it will help the firm “expand into a new emerging market.” David Munson, the dean of engineering at the University of Michigan, says he is “heartened that the acquisition of Arbor Networks calls for Arbor’s research and development activity to remain in Ann Arbor. This is a cornerstone for Ann Arbor’s rapidly developing software and networking industry” in the article.

Doherty did not offer Xconomy.com many specifics on the new firms commitment to Michigan, other than the usual corporate platitudes that Arbor  will “continue to grow our presence in Ann Arbor and in Chelmsford (MA).” However, even the U-M professor admits Michigan does not cut it for big time Tech.   “We knew we could build a phenomenal R&D team in Ann Arbor,” Jahanian says. “But to recruit the quality of executives [we wanted], we had to be either on the East or West Coast.” The combination of Battery Ventures being in the Boston area, the strong local business talent, and proximity to the East Coast’s big wireless carriers and Internet service providers swung the decision in Boston’s favor, he told Xconomy.com.

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From where I sit, the DHR product lines seem to be a good match for Arbor’s, but it is only a matter of time before the bean-counters in charge at DHR decide that even a “phenomenal R&D team in Ann Arbor” is too expensive and Michigan (and the US) will lose 90 more leading edge, well-paying jobs.  Another example of how tech unaware Michigan is that Xconomy.com-Detroit did not cover this, the article came from Boston.

 

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