For years, Intel, 3Com, Nortel Networks spinoff Netgear and other network hardware makers have championed the virtues of home networking, technology that allows consumers to connect their PCs and other peripherals in the home so they can share printers, files and a single Internet connection.
But little-known network equipment maker Linksys has catapulted its way to become the early leader in a market that most analysts believed would be dominated by Intel and 3Com, two well-known brand names that spent heavily on advertising to tout their initial products in consumer magazines.
"If you could bet in Vegas, the odds would have pointed to Intel and 3Com, but Linksys managed to rise above all the companies with more brand recognition," said analyst Michael Wolf of Cahners In-Stat Group. "Linksys has good products and does it cheaply. The bigger companies have a lot more overhead and cost a little more."
In just five months in the market, analysts say Linksys has surpassed Intel, Lucent Technologies spinoff Agere Systems and others to become the leader in wireless networking kits, technology that allows people with laptops to roam around the house and still surf the Web. The 13-year-old company has captured more than 50 percent of the market for simple "routers," devices that connect multiple PCs in the home to a cable or DSL (digital subscriber line) modem.
Last year, Linksys was the first to come out with a low-priced router that connected multiple PCs to the Internet, Wolf said. "That hit a chord with consumers. It was a product that did what people wanted it to do, it was simple to use, and it was cheap. They hit a sweet spot in that market and the timing couldn't have been better."
Linksys' low-end routers sell for between US$99 and $129, while its wireless networking hardware is priced between $200 and $250.
Home networking to connect with consumers
Sales of home networking products reached $290 million in 2000, a 97 percent
jump from the previous year. The market is expected to more than double to
$585 million this year, according to Cahners. Because the market is
still in its infancy, analysts say it's too soon to know which of the many
network equipment makers in the home networking market will become the
eventual winners.
Analysts expect the technology to take off in the coming years as more consumers get high-speed Internet access and want to share that access between every electronic device in the home. Although most products today are simple networking kits that connect PCs together, analysts envision a future in which a PC in the study could be used to turn off the oven in the kitchen.
With its many reorganisations and economic woes, 3Com in March dropped out of the home-networking market, although a 3Com spokesman said the struggling company could re-enter the market. In the meantime, a recent 3Com spinoff, modem maker US Robotics, has entered the market with its own line of products. Other remaining players include Proxim, D-Link, SMC Networks and Sohoware to join Intel, Nortel's Netgear and Lucent's Agere.
Analyst Stephen Baker of market research firm NPD Intelect said lesser-known companies, such as Linksys, can thrive in the market right now because most buyers of home networking equipment are people who use cutting-edge technology and aren't afraid to buy products from a company that's not a household name.
"Maybe in a year or two if it starts to explode, people will say, 'I want my Intel,'" Baker said. "But we're still in the early-adopter phase. The customers who are buying know specifically what they want. They're willing to trust" the smaller companies.
