Martin,
I agree with what you say. But I think that the low-end
near-term products may catch up a little sooner than we
think. Check out article below and tell me what you think,
plus article on next post.
Joe
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Computers & Technology Sales Of Network Chips Slow, But Intel, 3Com Don't
Investors Business Daily, Thursday, April 16, 1998 at 11:47
After nearly doubling in '97, sales of networking chips built into
PC motherboards are expected to slow this year - and two of the big
players don't care much.
Customers are turning to a competing product they find more
flexible than the chips. And Intel Corp. and 3Com Corp. are leaders
in both products.
The networking chips go by the name of LAN (local-area network) on
motherboard, or LOMs. They connect computers to networks, as do their
rival product, network interface cards, or NICs.
Last year, LOMs threatened to snatch sales from NICs. But the
tables have turned.
"In '98, there's going to be a lot of churn in the market," said
Justin Smith, an analyst with International Data Corp., a Framingham,
Mass.-based market researcher.
Though leading makers of LOMs, Intel and 3Com could benefit
regardless, because they're the top players in the overall market to
connect computers to networks. There are two main markets: LOMs - a
chip directly on the PC's motherboard; and NICs - a separate circuit
board, or card, easily added to a PC's innards.
LOMs sales rose to 10.2 million units shipped last year, from 6.4
million in '96 and 4.42 million in '95, says IDC. But this year's
shipments are expected to be the same or less than '97, Smith says.
A LOMs adds about $10 to the cost of a PC. Specialized NICs cost
about $80.
Even though it's a small market, a move to NICs and away from LOMs
could hurt LOMs makers Advanced Micro Devices Inc. and Texas
Instruments Inc.
But the LOMs market will recover, says Gary Smerdon, AMD's
networking product marketing director.
"We see '98 being nominally up," Smerdon said. "Overall, we
remain very bullish on this space."
AMD sells LOMs chips to IBM Corp., Gateway 2000 Inc. and Hewlett-
Packard Co.
PC buyers don't want to bother with installing NICs, Smerdon says.
They want their computers to arrive ready to work, and LOMs do that.
In addition, PC makers are under pressure to shave costs on PCs sold
to businesses.
Those factors add up to more LOMs sales next year, he says.
Last year, Intel led the LOMs charge. The world's largest
chipmaker spurred PC makers to include more networking capabilities
directly on motherboards.
But PC makers are stepping back from network-ready PCs. Buyers
want to customize PCs to suit their needs, and NICs may do the job
better because the technology has improved, analysts say.
Intel and 3Com have made NICs more attractive to PC buyers this
year. The cards include more features, such as network management
software to handle such multimedia demands as graphics and video.
Intel agrees that LOMs sales will stabilize this year, says Mark
Christensen, general manager for the company's Network Products
Division. About 40% of Intel's network connection business is on
motherboards, the rest NICs, he says. He says some companies buy
both products.
As long as customers buy NICs or LOMs from Intel, the company is
happy, he says.
"A lot of customers still want choice," Christensen said.
PC makers want to give them a choice, and NICs are more flexible,
Smith says.
"I think a lot of the PC suppliers are unclear what they want to
do," Smith said. "NICs fit in well because features can be added
later. You can choose to put features in or not, depending on what
your customer wants."
Compaq Computer Corp. boosted the LOMs market last year. The
largest seller of PCs included networking on motherboards, with Intel
as a supplier.
"Compaq 's old strategy was: 'Build it, and they will come,' "
Smith said.
But Compaq has changed to follow the made-toorder strategy of
competitors Dell Computer Corp. and Gateway.
Still, some major PC makers are attracted to the network-ready PC.
Acer Inc. is stepping up its use of LOMs. It's tightened its
relationship with Intel to make network-ready PCs.
Businesses that buy large numbers of PCs may find it easier to
have built-in LOMs technology, rather than buying NICs later.
But today's NICs can do more than simply connect a PC to a
network. Both 3Com and Intel in the last two months rolled out a
spate of new NICs that help computers manage multimedia demands and
work faster.
These new features should boost NIC sales, says Doug Spreng,
3Com's executive vice president of the Interface Products Group. |
