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Intel's networking arm aims for the middle

Intel adds new fuel its push into the networking world with the introduction of devices targeted at the expanding medium-sized business market.

Intel added new fuel to its push into the networking world today with the introduction of devices targeted at the expanding medium-sized business market.

Today's product release is the first announcement since the No. 1 chipmaker reorganized its business three months ago, creating a new products group that focuses on networking technology.

With profits from computer chips dwindling, Intel has latched onto the growing communications market by acquiring networking hardware makers, such as Shiva and XLNT, and announcing plans to create processors for networking equipment.

Intel's move signals a new tact for a firm that has traditionally gone after small businesses in the networking market with low-end routers and switches, network interface cards (NIC), and server appliances.

"We've been establishing the foundation with our low-end products and we've been successful," said Jim Johnson, Intel's general manager the network systems division. "But our customers want to get more performance with our solutions."

Intel today unveiled two new routers for business networks, and a new gigabit-speed Ethernet switch that connects business departments within a local area network, or LAN.

The chipmaker said the technology comes from Intel's recent Shiva and XLNT acquisitions, Johnson said.

"It signals Intel is serious about the networking market," said analyst Esmeralda Silva, an analyst with market researcher International Data Corporation. "They're obviously a leader in network interface cards, but they're illustrating they want to increase their presence in the switching and router market."

According to IDC, Cisco led the pack in the router market in 1998 with more than $4.6 billion in revenue. Intel ranked sixth, behind firms like Nortel Networks, 3Com, IBM, and Motorola. Although Intel has fared slightly better in the switching market, the company still trails the top four networking hardware makers which claim more than 75 percent of the market, according to IDC.

Room for Intel?
Still, Intel can climb up the networking ladder as switch sales are exploding, said IDC's Silva. In the second quarter of 1998, switch sales totaled $3.5 billion.

"The pie keeps getting larger and a couple of percentage points is still a lucrative opportunity," Silva said.

IDC analyst Paul Strauss said Intel has to continue to increase the number of product offerings in the coming year to compete with Cisco, Nortel, and 3Com.

"They need to do more. This is just really the start for them, but it is an indication of their future progress," he said. "Right now, it's difficult to imagine a mid-sized company to switch away from 3Com, Cisco, and others. They need to invest more in terms of new products, development, and make some more acquisitions."

Intel has already done well in acquiring companies to improve its products, Strauss said. The Shiva purchase, for example, gave the company virtual private network (VPN) technology, which allows users to gain secure access to corporate networks through public Internet connections.

In addition to routers and switches, Intel's new communications products group includes the company's LanDESK network management and security software, and computer telephony technology from its recent Dialogic acquisition.

Within the next year, Intel will start using the recently announced networking processors in its own routers and switches, Intel executives said.

The new Intel 6000 Series Switch will be available in late September, priced at $13,995. The Intel Express 9500 routers are now available, priced at $1,449. The Intel 8200 router will be available at the end of the year.