Article about ROK, I've posted the highlight of the article unless of course your a ROK investor. <g>
Modem chip mess
Rockwell's other major operation, semiconductor systems, is more of a
gamble. The division has been the largely unknown leader in modem chips, a
business now undergoing dramatic changes and perhaps facing extinction.
Nevertheless, the company says that it is committed to semiconductors,
even though the division turned in flat sales from 1996 to 1997. The group's
revenue in 1997 was $1.6 billion, 20% of Rockwell's sales, with operating
earnings representing 21%.
Sales for Rockwell semiconductors boomed in the first half of 1997, but
were poor in the second, largely because of a hiccup in the 56k modem
market.
About half ($800 million) of Rockwell's semiconductor revenue is derived
from sales of chips for PC modems. It supplies most modem makers, and is
still the largest modem chip supplier. Its leadership began in sales of modem
chips for Japanese fax makers.
Rockwell's struggles began during the transition to 56k modems that started
in early 1997. Knowing that one of its largest customers--and the biggest
consumer modem company-- U.S. Robotics (now part of Santa Clara's
3Com Corp. ) was switching to Texas Instruments Inc., Dallas, as the
supplier for its 56k chips, Rockwell announced an incompatible design,
k56flex. Then it couldn't deliver the new chips, but overnight prices dropped
dramatically on its older V.34 modem chips, which were considered
old-fashioned. "It shot itself in the foot," notes Will Strauss, president of
Forward Concepts, a research firm in Tempe, AZ.
When both designs entered the market, it was Beta and VHS all over again.
Buyers were confused, especially because each chip has no clear
advantage over the other. Soon sophisticated users learned that the 56k
modems typically transmit at speeds only in the low 40 kilobits per second
(kbps) range because of FCC regulations and telephone line conditions. As
a result, many customers decided to wait.
The controversy has been resolved with a common standard, and soon the
modems will be interoperable. But Rockwell's dominant 65% market share
in the 28 Kbps-33 Kbps generations will drop to about 40% in 56k modems,
about the same share that TI has, according to Forward Concepts.
Nevertheless, Rockwell has shipped about 5 million k56flex chipsets to
PC-modem customers and 2 million more to central-site modem customers
such as Internet service providers. Depending on the modem manufacturer,
many of the installed modems can be upgraded to meet the new standards.
Whatever the outcome, the analog modem as we know it has limited
prospects. Two trends will kill it. Consumers are demanding faster access to
the Internet and faster microprocessors, and general-purpose digital signal
processing (DSP) chips will allow software to take over today's modem
function in future computers.
eb-mag.com |
