"3Com And Intel Wage War Over Networking NIC(he)"
Date: 4/6/98
Author: Michele Hostetler
The No. 1 chipmaker and the No. 2 networking company are battling for
a shrinking market.
Santa Clara, Calif., neighbors 3Com Corp. and Intel Corp. are fighting
over network interface cards, a circuit board added to computers so they
can connect to networks.
But there's less to spar over these days. The market is expected to fall to
$3.68 billion this year, down from a high of $3.94 billion in '96, says
In-Stat Inc., a Scottsdale, Ariz.-based market researcher. The main
reason for the slip is falling prices.
The top player can make money, but that might leave only scraps for
others, says In-Stat analyst Diane Myers.
''It's a two-horse race,'' said Mark Christensen, general manager of Intel's
Network Products Division. ''May the best one win.''
After intense combat last year, 3Com and Intel this year have armed
themselves with new products.
Intel sparked a '97 price war, slashing prices almost in half to about $80
for the most advanced NICs. 3Com followed suit.
Both companies claimed victory, and both had a point. 3Com boosted
market share a tad, while Intel helped push the transition to faster
technology.
Intel and 3Com have different reasons for wanting to rule NICs.
Intel wants networks and PCs to move faster. That way it can sell speedier
microprocessors. Quick NICs are a part of Intel's plan for continued
dominance in microprocessors, the brains of a computer.
To promote the need for faster microprocessors, Intel is moving deeper
into networking. It began selling a spate of new networking products last
month.
3Com wants to control the network at its ''edge'' - the PC. The company
wants PCs to tell the network what it needs, rather than the other way
around.
''What they're fighting over is, they want to control the desktop,'' said
In-Stat's Myers.
''The NIC market is not there any more,'' Christensen said of 3Com's
approach. ''It's a connection market. They (3Com executives) only look at
the NIC. That is really the Achilles' heel of their vision.''
Intel needs to rethink its networking strategy and stick to chips, counters
Doug Spreng, executive vice president of 3Com's Interface Products
Group. 3Com and chief rivals Cisco Systems Inc. and Bay Networks Inc.
will block Intel's networking efforts, he says.
''My prediction is: more noise and no gains,'' Spreng said of Intel's push
this year. ''I'd say, 'Mark Christensen, the ball's in your court.' ''
Either way, the customer wins, says Justin Smith, an analyst with
International Data Corp.
Price cuts will save corporate buyers $2 billion to $3 billion over the next
few years, he estimates.
And 3Com and Intel continue to make money, In-Stat's Myers points out.
Volume and more efficient manufacturing maintain earnings, she says.
Last year's price war was prompted by Fast Ethernet, which is 10 times
speedier than normal Ethernet's 10-megabit pace. Instead of buying an
Ethernet NIC, Intel wanted customers to buy 1 0/100 combo cards. That
way when their network upgraded to Fast Ethernet, the NIC would be
there.
But the move to Fast Ethernet has a downside. It slows sales of Ethernet
NICs, dragging down the overall NIC market. The industry is about
halfway through the transition, 3Com's Spreng estimates.
But the Fast Ethernet segment of the NIC market will rise to $1.95 billion
this year, from $1.38 billion last year and $661 million in '96, says In-Stat.
3Com held 50% of the Fast Ethernet market in the fourth quarter, up 1%
from first-quarter '97, In-Stat says. Intel fell to 23% from 27%.
Both 3Com and Intel executives say they don't plan to start another price
war. Instead, 3Com and Intel want to give customers other reasons to
buy. They're piling on new features, such as the ability to control
information flow.
NICs also can help solve bandwidth problems. Bandwidth is the size of
the ''pipe'' that information runs through on its way to other networks or
PCs.
3Com in February added software called ''dynamic access'' to its NICs to
prioritize traffic on a network. This will help speed bandwidth-hungry tasks
such as videoconferencing.
Other new software features include ''wake-up on LAN,'' which gives
network managers the ability to turn on a computer from a remote site.
But companies may not realize they need wake-up on LAN or other
network management software included in NICs, IDC's Smith says.
''These smart NICs definitely have potential,'' he said. ''3Com and Intel will
need to incubate demand.''
PC makers could spur awareness for these intelligent NICs. Intel and
3Com are vying for more sales to PC makers such as Compaq Computer
Corp., Hewlett-Packard Co. and Dell Computer Corp. They put the
NICs into their PCs.
Today, about 20% of 3Com's NIC sales are to PC makers, Spreng says.
That will shift to 60% to 70% in the next two to three years, he says.
(C) Copyright 1998 Investors Business Daily, Inc.
investors.com
Mang |
