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Compaq, HP eye Ethernet market

Compaq and rival Hewlett-Packard are in advantageous positions to expand their businesses as Gigabit Ethernet technology comes closer to market.

CNET News staff
3 min read
Compaq Computer (CPQ) may have timed its entry into the networking market just right with recent acquisitions of Ethernet hub and switch maker NetWorth and network interface card player Thomas Conrad.

The much-hyped Gigabit Ethernet internetworking technology, with its roots in Ether net, is a natural next-generation pipe for local area networks (LAN) and workgroups, though it is expected to initially vie for the backbone with asynchronous transfer mode (ATM). But because it derives from classic Ethernet, many small networks will use it. Because it moves data at 1 gigabit per second (1000 mbps), adoption rate and market growth are expected to be exponential in the enterprise and significant in the workgroup.

Thus, it seems that Compaq and rival Hewlett-Packard (HWP) are in advantageous positions to expand their businesses as the technology comes closer to market. Expansion could include server connections as well as switching customers.

With multiple data types and increased traffic streaming over the wire in the Internet age, a bandwidth increase--like the one gained with Gigabit Ethernet adoption--will be a necessity for many customers.

A recent study on Gigabit Ethernet by the Dell'Oro Group shows that the majority of users want to use the embryonic technology both for switches and to facilitate a server-to-switch connection.

Initial Gigabit Ethernet products, based on a preliminary version of the standard, are expected in the first half of 1997. Products based on the final technology specification may not be out until early 1998.

Both Compaq and HP will take their time in bringing Gigabit Ethernet products to market. Compaq officials said they don't expect products to be shipping until at least the second half of next year. HP officials told a similar story, noting they may wait as long as early 1998 to insure that customers will get a product that interoperates within their customers' networks. But as long as a migration path is there, HP will rollout product, according to Rex Pugh, HP's planner for high-speed networking for its Workgroup Networks Division.

"We're not in the Gigabit Ethernet business to be in the Gigabit Ethernet business, we're in it to serve our customer's needs," said Mark Hudson, networking product line manager for HP's General Systems Division.

But at the same time, "We're really an Ethernet company so that's a core technology (Gigabit Ethernet) we have to have," Pugh added.

Compaq said it would partner with third parties as well as internally develop Gigabit Ethernet products. HP is expected to follow a similar path, though Compaq may be more tempted to snatch up a few of the plethora of Gigabit Ethernet start-ups sprinkled throughout Silicon Valley.

"Clearly, we see it as one of the leading technologies moving forward," said Jeff Wilbur, Compaq's director of marketing for networking products.

Wilbur said Compaq will initially focus on connecting its popular line of servers to a Gigabit Ethernet back-end pipe, then offer Gigabit Ethernet modules in its line of switches for switch-to-switch connections. HP executives said most of the demand may be as a server-to-switch connection.

Each company's cautious approach will not sway other vendors from coming out with proprietary Gigabit Ethernet implementations as early as the first half of next year, a fact that HP said may be "detrimental" to the growth of the Gigabit Ethernet industry.

"We're totally in the hype phase," warned Tom Anderson, a high-speed networking product manager at HP. "As a CIO, you don't want to sign a check and then find out nine months later you have a dead horse."

Esmerelda Silva, an analyst with market research firm International Data Corp., said the workgroup Gigabit Ethernet will trail enterprise implementations of the technology for some time, pegging the workgroup market at $765 million of a total $1.5 billion Gigabit Ethernet market by the year 2001.

"The opportunity for (Compaq and HP) with respect to Gigabit Ethernet will be somewhat limited for a few years," she noted, pointing to the current LAN switch migration to Fast Ethernet.

She said standards wrangling could further delay workgroup adoption of Gigabit Ethernet. "You never really know what you're going to end up with until you see product," she said.