3Com Heeds The Call Of
Voice New Buy Improves Its
Modems Audio Capabilities
Date: 12/2/98
Author: Michele Hostetler
3Com Corp. hopes to pump up the volume on its
modem sales Wednesday by buying audio firm
EuPhonics Inc.
Though the purchase is for a puny $8.4 million,
3Com executives call it big.
''Audio will be a big part of the (modem) market
next year,'' said Bob Suffern, 3Com's vice
president of business development for its personal
communications division.
Privately held EuPhonics, based in Boulder, Colo.,
makes audio software that goes into sound cards,
consumer electronics and chips. This includes
chips that go into modem products. 3Com is
buying the 14- employee company for cash and
stock.
Internet games with loud gunshots and blaring
music are demanding more from modems, Suffern
says. So are telephone features that are fast
becoming part of PCs, such as answering-
machine and speakerphone capabilities.
By adding EuPhonics' features, 3Com can prop up
its eroding modem prices and compete better
against Rockwell International Corp. and Motorola
Inc., says Will Strauss, an analyst with research
firm Forward Concepts Co. in Tempe, Ariz.
Average modem prices have fallen to $100 from
$200 a year ago, he says.
Audio gives consumers another reason to buy,
Strauss says. Last year's modem war over the
standard that would be used for the new
56-kilobit-per-second modems sparked buyer
interest. Many upgraded to the faster modems.
''Unfortunately, that left few people to upgrade
this year,'' Strauss said. ''It has not been a good
year for the modem business.''
Thanks to companies like EuPhonics, modems are
bringing to PCs much of the audio available over
the Internet, Strauss says.
EuPhonics has expertise and patents in audio for
digital signal processing (DSP) chips. These chips
can process analog sounds like voice and convert
them to the digital language computers use. With
the EuPhonics DSP technology, 3Com can add
what it calls 3-D audio and music synthesis -
basically, more robust sound - to its modems and
other networking gear, he says.
''The wonderful thing about a DSP chip is it time
shares,'' Strauss said. ''It can do several things
simultaneously.''
Say someone is playing a game on the Web and a
phone call comes through. The modem provides
the game's sound and lets the player halt the game
and take the call, 3Com's Suffern says.
3Com also hopes to sell its modems to PC makers
so the devices become standard in their
computers.
With EuPhonics' technology, 3Com can combine
audio and modem software into one set of chips
instead of two, saving space in a PC, Suffern
says.
''We hope to definitely get more (PC) business out
of this,'' he said. ''We feel we have the best of
both worlds now.''
Audio technology also gives 3Com a boost in
converged networks that transmit data, voice and
video, says Glenn Gabriel Ben-Yosef, an analyst
at Boston-based Clear Thinking Research Inc. He
says more people will be making telephone calls
via the Internet. These calls are cheaper than
normal phone service, though the quality is poorer.
''Everyone is sick of paying toll calls,'' he said.
3Com is positioning itself as an early player in
voice over IP (Internet Protocol), which transmits
phone calls over the Internet.
The additional audio capability will help 3Com in
that market, Ben-Yosef says. Voice-over-IP gear
sales could surge to $6 billion by '02 from $350
million this year, he says.
Audio will take off faster than video in the
converged network of the future, he says.
''Video is overhyped,'' Ben-Yosef said. ''You form
a relationship with that voice. Humans are tied to
the cadence of voice . . . much more so than to
video.''
(C) Copyright 1998 Investors Business Daily, Inc.
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