The extremely big gorillas may be taking over.
Starts from small and mid size and pretty soon, before long,the bif gorillas may be all over the places.
IMO, CSCO has pretty tough challenges ahead;
(1) at the high-end from LU, NT and the European giants that acquired tons of networking companies (one thing for sure, the mkt for data equipments in Europe will definitely have negative impact from these acquisitions as the European tele compainies now also have data equipments to sell)
(2) at the low and medium end, from INTC, CPQ, IBM to many small and medium LAN comapnies such as MRVC.
(3) at the Enterprise, large ISP LAN mkt segment by the GBit startups such as Extreme, Foundry and Alteon.
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Intel's network equipment gamble pays off
It may not be Cisco, but Intel is winning over
small and mid-size businesses with its network
gear.
By DENI CONNOR
Network World, 04/12/99
Intel's network thrust
Intel has never had any illusions about being the
network industry's next Cisco. But the chip maker has
quietly established itself as one of the leading providers
of network gear for small and mid-size businesses and
is making the kinds of investments in network
companies that would make Cisco proud.
Intel has succeeded in the network market by
emphasizing low prices, high volumes and lots of
component-level gear. The company has invested in
hot technologies, such as virtual private networks
(VPN) and Gigabit Ethernet, but has stopped short of
introducing high-end enterprise network gear.
"We're not going to make very large switches and
routers for the Fortune 1000 enterprise or telco
industry," says Mark Chris-tensen, who heads Intel's
Network Commu-nications Group. "Why should I go
do a front-al assault on that marketplace? I'd get
killed."
Instead, Intel is offering small and mid-size companies
key network components, from network interface
cards (NIC) to routers. Intel also provides software
for managing networks.
Intel's fast-growing network business now accounts
for about 10% of the company's annual $26.5 billion in
revenue. Intel is looking at acquisitions, partnerships,
licensing deals and OEM agreements to build the
business, Christensen says.
And why not build the network business? The more
reasons Intel can give customers to network their PCs
and servers, and to buy faster versions powered by
new Intel processors, the better for Intel's overall
business.
The company has divided the network market into a
handful of segments and is keeping its focus on:
Network adapters for all sizes of companies.
Switches, hubs, remote access products and network
appliances, for small and mid-size enterprises.
Component-level products sold through OEM
partners.
Products for home computer users.
NIC leadership
By far, Intel has been most successful in the NIC
business, in which the company actually topped
established leader 3Com in two categories during the
fourth quarter of 1998 (see chart).
In particular, Intel has shined in the market for NICs
that are built into chips, which in turn are built into
computers. Intel's components show up in products
from the likes of Compaq, Dell and IBM.
While it may be hard to differentiate products within
the NIC market, Intel has set itself apart with its
advanced silicon designs, industry watchers say.
Intel just introduced the 82559 Ethernet controller, a
third-generation product on which the company's
Ethernet product line is based. The smaller form of the
new controller will make it easier for equipment
makers to fit the technology into their products, which
makes the 82559 a good bet to show up in lots of
corporate network equipment, says Michael Wolf, an
analyst at Cahners In-Stat, a Phoenix market research
firm.
Intel has also been successful in the market for
internetwork gear. In fact, Intel's switch and hub
revenue increased fivefold in 1998 from the previous
year, according to Cahners In-Stat.
Intel's edge in the internetwork market until now has
been lower prices. That, for example, is how the
company got Phil Spears, who was consulting for a
publishing company, to recommend Intel over Cisco.
"I couldn't hand my client a $300,000 to $400,000
quote for a Cisco system," says Spears, a consultant
with Computers for Professionals. "I knew I could get
them a similar Intel configuration that wouldn't be quite
as glamorous or robust, but would be good enough to
carry them for the next four or five years."
The client, Lippincott, Williams & Wilkins, now uses
Intel adapters, hubs and switches across its
1,000-user network.
Reaching into its wallet
Intel is trying to ensure that its products stay
competitive by acquiring whatever technology is
necessary. The company has invested a total of $2.5
billion in more than 200 companies, many in the
network market. Last year, Intel pumped $830 million
into other companies.
In March, Intel closed its $185 million acquisition of
Shiva, a leading vendor of remote access technology.
While Shiva struggled in the months before Intel
acquired it, the company did generate more than $100
million in remote access revenue last year and has
been working on VPN technology that should prove
valuable to Intel.
Intel's latest acquisition blockbuster is its $2.2 billion
bid for Level One Communications. Intel is after Level
One's Gigabit Ethernet silicon technology, which Intel
figures will serve the needs of equipment makers
supplying telecommunications carriers and ISPs.
Intel is also looking to differentiate itself with new
network appliances and single-function boxes, such as
the InBusiness eMail Station and Internet Station.
These products simplify e-mail exchange and Internet
connectivity, respectively, for small companies.
Of course, gaining a foothold in the network industry
has not been a cinch for Intel. The company, along
with some others, failed in its bid to sell customers on
the hub-on-a-board concept during the early '90s.
Intel retrenched and came out with stand-alone hubs in
1995.
Intel's Ethernet adapter business has not been without
its hitches, either. The company went from zero
market share to 15% in its first year in the market, but
as a result couldn't keep up with demand and had to
scramble to get its products out. Service and support
has also been a challenge for Intel's network business
group.
"Early on, you had to really work your way through
[technicians] before you found one who really knew
the product," Spears says. Intel's support staff now
matches up well to those of Cisco and 3Com, he says.
Intel has announced plans to shore up its support
offerings by delivering a Web-based help desk to
serve its consumer and small-business customers.
With an increasingly solid support staff in place and a
lot of new technology in the pipeline, Intel is poised to
raise its profile in the network market.
"Intel has a clear view of where its products are going,
the market it is trying to get a hold of and who it wants
to go after," Spears says. o |
