| |
TO All, Intel, Networking & MRVC, IBD article 20 Mar 97.
Scratching Its Own Back, Intel Peddles
Networking
Date: 3/20/97
Author: Michele Hostetler
In '97, Intel Corp. is going to play the chameleon - today a chipmaker,
tomorrow a networking equipment supplier and back again.
The $20.8 billion microprocessor kingpin has promised to deliver a
boatload of new networking products this year. In fact, it will roll out a
new device ''every two to three weeks'' - the most in the company's
history, says Mark Christensen, general manager of Intel's networking
products division.
Startling? Not really, say analysts. By pushing out cutting-edge networking
products at competitive prices, cagey Intel hopes to accelerate the
adoption of faster networking technologies. And that, say pundits, will feed
demand for faster microprocessors.
''Intel's (chip) plants are a perpetual feeding machine, like a shark,'' said
Don Miller, an analyst with market researcher Dataquest Inc., San Jose,
Calif.
At first, Intel will focus on Fast Ethernet, a charged-up version of the
popular Ethernet networking standard.
''The reality is, this is the year Fast Ethernet is going to get turned on,''
Christensen said. ''It's a horse race right now. This year we're going to find
out who wins.''
Long a player in network interface cards - devices that connect PCs and
peripherals to networks - about nine months ago the chip titan began
upping its commitment to building and selling other networking gear.
But before the Santa Clara, Calif.-based company becomes a true
networking powerhouse, it must build name recognition. It also needs to
overcome a past reputation for half-hearted attempts at networking.
''They're clearly not a soup-to-nuts networking company,'' said Lee Doyle,
an analyst with International Data Corp., a market researcher based in
Framingham, Mass. ''But they're obviously a very large company and can
have an impact.''
Fast Ethernet - also known as 100-megabit Ethernet - is a good starting
point for the chip firm. It is 10 times faster than standard 10-megabit
Ethernet.
Many of today's Fast Ethernet products include both speeds so companies
can future-proof their networks. The products are called 1 0/100.
Intel's interest in this area is natural because it wants to speed up the PC,
says Diane Myers, an analyst with In-Stat Inc., a Scottsdale, Ariz.-based
market research firm.
Fast Ethernet is a smart choice for Intel. ''It's definitely a good starting
point,'' Myers said. ''It grabs them a presence at the desktop.''
It's also a market Intel can accelerate. For example, last month Intel
slashed prices on 1 0/100 Fast Ethernet network cards. Market leader
and Santa Clara neighbor 3Com Corp. quickly followed suit, as did other
network card makers.
3Com sped past Intel in the 1 0/100 Ethernet card market during the last
half of '96, say researchers. But Intel hopes its bold pricing move and new
products will bring customers to its door.
''Our basic message to our customers is that Intel is going to provide them
with 1 0/100 everywhere,'' said Christensen. That includes the gamut:
switches, hubs, adapters, low-end routers and print servers.
Due to price cutting, the overall worldwide network-card market is
expected to be static at about $4 billion for this year, says IDC.
However, the 1 0/100 Fast Ethernet card market is expected to grow
from 18% of the market in '96 to more than 60% by 2000, says
Dataquest.
''Intel can move a huge amount of networking products through leverage of
their competitors,'' said Dataquest's Miller. ''They know 3Com will follow
them because they don't want to lose market share.''
Intel also is working on gigabit Ethernet, which is 10 times speedier than
Fast Ethernet. Some gigabit products are just coming to market, but Intel
hasn't released any yet. This next wave in networking should push Fast
Ethernet down to the desktop. Gigabit Ethernet will take over the
backbone, which is the main pipe running through a network.
But Intel's narrow focus doesn't pit the company against all the networking
industry heavyweights. ''I wouldn't position them against Cisco at all,''
IDC's Doyle said.
In fact, Intel already works with the networking leader, San Jose,
Calif.-based Cisco Systems Inc., and has done so for about three years.
The pair, along with Redmond, Wash.-based Microsoft Corp., recently
announced plans to open a multimedia networking laboratory so customers
can test products.
The relationship could grow closer.
''It would certainly be my personal hope,'' said Don Listwin, senior vice
president of market development for Cisco. ''We just view Intel as a great
partner in the networking field.''
Perhaps Cisco's name in networking will rub off on Intel.
''They really need to turn their name recognition from (the current situation
in which) no one knows they're in (the market) to a company known for
networking,'' Doyle said. ''So they're not just considered to be an
alternative to 3Com.''
Intel has shown it will use its deep pockets to build its presence in
networking. It bought U.K.-based networker Case Technology, a
subsidiary of Anite Group PLC, for $72 million in January.
In another move, last November Intel bought a stake in MRV
Communications Inc. of Chatsworth, Calif. MRV makes high-speed
Ethernet switches. And it paid $52 million for a 12.5% stake in Thousand
Oaks, Calif.-based Xircom Inc. in January. Xircom sells networking cards
for mobile computers.
Meanwhile, another giant is making a push into the attractive networking
arena. Armonk, N.Y.-based International Business Machines Corp. also
created a networking division last year to capitalize on the expanding
market.
So Intel must move judiciously. It also must avoid disappointing
networking customers, who have plenty of options.
''Intel's main challenge is not to try to be too many things for too many
people - (it needs to) stay focused,'' advised Dataquest's Miller. ''(It needs
to) pick the key critical (networking) areas. That seems to be what it's
doing.''
(C) Copyright 1997 Investors Business Daily, Inc.
Metadata: INTC COMS CSCO MSFT AIE MRVC XIRC IBM I/3675 I/3574 I/8065
I/4890 I/3573 E/IBD E/SN1 E/TECH |
|
