Modem Makers Reach an Accord
With New Compromise Standards
By FREDERICK ROSE
Staff Reporter of THE WALL STREET JOURNAL
A bitter fight over conflicting technical standards for
high-speed computer modems, pitting opposing groups led by
3Com Corp. and Rockwell International Corp., was
tentatively resolved last week with the adoption of
compromise standards.
The decision by a working committee of the International
Telecommunications Union, an arm of the United Nations,
won't become final until a series of formal steps are taken
that are expected to take many months. But for the dozens of
companies involved in the year-long dispute, the preliminary
agreement hammered out at an Orlando, Fla., hotel near
Disney World removes a major roadblock for the latest
generation of modems, which transmit through ordinary
telephone lines at speeds known in computer jargon as 56K, or
close to 56,000 data bits per second.
As word of the technical resolution spread Friday, 3Com
shares jumped $2.5625, or 7.6%, each to close at $36.4375.
Volume was 14.2 million shares, making it one of the most
actively traded issues on the Nasdaq Stock Market. Rockwell
shares gained $1.1875 to close at $50.3125 in New York Stock
Exchange composite trading.
3Com and its U.S. Robotics division, acquired early this year
for $6 billion, have engaged in a public feud with Rockwell's
semiconductor division over conflicting standards for this new
generation of modems. At stake is a potential world-wide
market of as many as 100 million of the mechanisms that
connect computers through phone lines. With neither side
giving way on the 56K battle, the computer world has been
divided between incompatible transmission techniques:
3Com, the world's largest modem maker, called its "x2," and
an alliance led by Rockwell, the world's largest maker of
computer chips for modems made by others, called its
"K56flex."
As expected by industry insiders, the newly emerging
international standard encompasses technical details from
both transmission techniques. Each side claimed victory,
noting that one part or another of the technology came from
its camp. In fact, major contributions also came from Lucent
Technologies Inc. and Motorola Inc. Moreover, the proposed
new standard contains new technical capabilities that enable
better communications over certain phone lines.
"Everybody is a net winner in this one," said Ernest Raper,
senior market analyst at VisionQuest 2000 Inc., a
modem-market tracking concern based in Moorpark, Calif.
Mr. Raper estimates that world-wide sales of silicon chipsets
that are the core of modems will total between 28 million and
30 million next year -- double this year's sales. Emergence of
a standard, moreover, likely will slow the descent of modem
prices, which have plummeted as modem makers struggled to
convince wary consumers to choose between competing,
incompatible equipment. With the new standard, it is
expected that most 56K modems made this year can be
upgraded relatively simply through the insertion of new
software.
The prospective emergence of a standard "removes a major
negative" for 3Com, said Paul Weinstein, an analyst at
PaineWebber Inc. As it pushed its x2 technology, 3Com had
flooded retail stores with modems. But slower-than-expected
sales left inventory backed up on the shelves, and the
company last week said it expected to report
lower-than-anticipated profit and sales for the fiscal quarter
ended Nov. 30.
Anticipated growth in modem sales also should benefit
Rockwell. Dwight Decker, president of Rockwell
Semiconductor Systems, welcomed the truce, saying in an
interview "this is the point where the dam has broken and
everyone has decided that we can move ahead." The
compromise was reached after a group of 25 modem makers,
which didn't include either 3Com or Rockwell, reached
consensus after a secret nonbinding vote. |
