Sounds like Intel is getting desperate. Read article.
Computers & Technology 3Com And Intel Wage War Over Networking NIC(he)
Investors Business Daily, Monday, April 06, 1998 at 13:23
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 10/100 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. |
