****Cable-Modem Standard To Shake Up Industry - Analyst
SAN JOSE, CALIFORNIA, U.S.A., 1999 DEC 21 (NB) -- By Steven Bonisteel, Newsbytes. Motorola Inc. [NYSE:MOT] and Nortel Networks Corp. [NYSE:NT] dominate global sales of cable modems in an industry about to be shaken up by a shift to retail sales of the devices, according to a report released today.
Dataquest Inc., a statistics-gleaning unit of Gartner Group Inc., [NYSE:IT] said Schaumburg, Illinois-based Motorola is the world's top supplier of the modems that allow computer owners to connect their PCs to the Internet via their local cable television systems. Dataquest said Motorola shipped 310,000 units in the third quarter of this year, a number that represented more than 37 percent of all cable modems delivered during the period and which was nearly three times the 105,000 shipped by Nortel and its Arris Interactive joint venture with ANTEC Corp. [NASDAQ:ANTC].
Nortel, a Canadian company with headquarters in Brampton, Ontario, accounted for 12.6 percent of all cable modems shipped during the year's third quarter, while no other single manufacturer accounted for more than 10 percent.
But Patti Reali, senior industry analyst for Dataquest's e-Remote Access Worldwide program, told Newsbytes that a rapid switch to new installations using modems compatible with the Data Over Cable Service Interface Specifications (DOCSIS) standard won't swell the ranks of viable vendors. Instead, she said, the intense competition for the lower-price, interoperable DOCSIS modem will leave just a few companies standing.
Dataquest said the global cable modem market reached 833,000 units in the quarter, reflecting growth that brought first-half 1999 sales shipments to 1.08 million units. At that rate, Dataquest said, cable modem shipments may exceed three million units by the end of 1999, which would mean revenue of nearly $700 million.
Dataquest said Motorola and Nortel, plus three other vendors - Com21 Inc. [NASDAQ:CMTO] of Milpitas, Calif., Terayon Communications Systems Inc. [NASDAQ:TERN] of Santa Clara, Calif., and General Instrument [NYSE:GIC] of Horsham, Penn. - shipped 75 percent of all cable modems in the third quarter of the year.
But the Dataquest analysts said the rankings changed when they counted shipments of modems compatible with the Data Over Cable Service Interface Specifications (DOCSIS) standard. Of the 275,000 DOCSIS-based modems shipped during the third quarter, General Instrument was the leading supplier, with 21 percent of all units.
3Com Corp. [NASDAQ:COMS] of Santa Clara, Calif., shipped 19 percent of all DOCSIS modems, while Thomson Consumer Electronics Inc., a unit of France-based Thomson Multimedia, was in third spot with an 18-percent share.
Motorola and Nortel/Arris remain leaders in overall shipments because so many cable companies have already outfitted networks for some of the modem manufacturer's proprietary products.
"Cable operators aren't going to swap out what's out there," Reali said. "If it's working it's going to stay out there, but anyone that's new that's coming online will be directed to standards-based products. Not only is there going to be more of it, it's going to lower priced."
Dataquest said it predicts that DOCSIS modems will account for 40 percent of all shipments in 1999, and that this will be the last year that cable modems based on proprietary technologies will exceed shipments of standards-based equipment.
In 2000, Dataquest said, 80 percent of all cable modems are likely to be DOCSIS-based, and that the 20 percent remaining will also include those conforming to European DVB/DAVIC (Digital Video Broadcasting/Digital Audio Visual Interoperability Council) standards.
"The market is going to shift radically in the next year," Reali said. "Our vision is that there's only going to be a handful of players - less than a half a dozen. There are all these people getting DOCSIS certification, but it's going to come down to cost, cost, cost. Fundamentally, it becomes a chipset, it becomes commoditized. You're looking at the same kind of market action that analog modems went through."
The switch to DOCSIS doesn't necessarily mean an end to the reign of all the current leaders, Reali said. Nortel/Arris has a DOCSIS offering, and Motorola and General Instruments have announced a merger that will see Motorola gain GI's DOCSIS products.
"Despite the fact that Motorola may not have gotten its product certified (as DOCSIS compatible), it has a product that it can ship when the companies are merged," Reali said.
"Studies have shown that Motorola, despite the fact that it's not in the computer peripherals market, has very high visibility with consumers for computer peripheral devices. That's just as a crossover effect from pagers and phones and the like. The GI brand just has to shift to Motorola, and GI is already kicking butt in the international market as well."
However, the situation is different for Nortel. "As the market begins to migrate towards retail, Nortel, fundamentally, doesn't have a big retail presence," Reali said. The solution for Nortel will be to OEM its technology through higher-profile vendors and, increasingly, to focus on a new kind of product, the "broadband gateway," that will eventually connect entire homes to both voice and Internet services through a single port.
Left standing in the cable modem business, Reali said, will be "General Instruments (Motorola), Thomson Consumer Electronics, Toshiba, 3Com, and, potentially, the two niche players that are pure-play, Com21 and Terayon." And she added that, as things stand today, there is little hope for others.
GartnerGroup's Dataquest can be found on the Web at: dataquest.com .
Reported by Newsbytes.com, newsbytes.com
16:33 CST Reposted 21:27 CST
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