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Hardware makers try on networking hat

PC and chipmakers, drawn to the success of networking start-ups, are buying network-oriented companies and integrating Internet technology for phone systems into their products.

LAS VEGAS--Changes in voice technology are coming in loud and clear for the PC industry.

Personal computer, semiconductor and software makers, facing increasing competition and price cuts, have recently been drawn toward the success of small networking start-ups. To tap the hot telecommunications market, these hardware and software manufacturers are buying network-oriented companies to integrate voice-over-Internet Protocol (VoIP) technology into their products.

Comdex: Closing the
millennium Certain events in the industry have allowed for this strange marriage of PC and telecommunications technologies. The Internet has had a profound effect on networks and their construction, and has brought down the cost of previously expensive phone switching technology and software. As well, pricing pressures in the PC market have forced manufacturers to look for new sources of revenue.

As a result, a new breed of voice-enabled equipment is hitting the market.

This week at the Comdex trade show, for example, NEC announced a new voice-over-IP private branch exchange (PBX) telephone server. PBX systems act as a central switch in an office to direct phone calls to their destination. The company's Neax Express, which handles voice traffic for mid-sized companies, is NEC's first PBX system based on voice-over-IP technology.

Voice-over-IP technology allows a traditional phone call to be sent over a network much the same way email transmissions are sent. A voice call is essentially treated like data when it is sent over networks based on Internet Protocol.

Many companies believe that by using Internet Protocol (IP), the behind-the-scenes technology that shuttles information around the Web, these new networks are cheaper and more efficient in handling voice and data traffic simultaneously. Predictions vary widely as to how large the market for voice-over-IP equipment eventually will become.

A study found that in 1997, only 2 percent of large organizations used voice-over-IP technology in their networks. That number has grown to only 4 percent this year, according to industry consultants Forrester Research. But others are more bullish on the technology's potential.

This week semiconductor leader Intel agreed to buy Parity Software Development, a computer telephony software company. Intel earlier acquired Level One Communications, a chipmaker serving the networking market. Intel chief executive Craig Barrett has said he believes the PC industry can be competitive in the communications market, particularly in the PBX business.

NEC has operated in the telecommunications realm for years, and hopes to help create a new niche for PC-based technologies.

"We're looking to see what the market does," said Dan Allman, manager of product management for private branch exchanges at NEC. "Some people, such as Cisco, think [VoIP] is going to take over the world. Others have a more skeptical view. We're not sure whether IP is going to take over the world or not."

Allman said NEC's technology is expected to ship by February.

Similarly, Hewlett-Packard recently threw its hat in the communications ring with a PBX offering of its own.

The company introduced a circuit-switched PBX server in June, incorporating software from Nortel Networks. The product, HP executives said, is a good example of how the firm can modify existing products to make them more appealing to corporate communications network managers.

"It's about expanding our current relationships with our customers," said John McHugh, general manager for HP ProCurve, the company's networking business. "What we're trying to do is engage the customers on their turf."

HP is likely to offer a VoIP-based version of its PBX product, McHugh said, but wouldn't specify when.

The PC industry is jumping into the VoIP market to offer corporations an alternative to more expensive PBX technology offered by the likes of Lucent Technologies and Nortel.

Yet some analysts are skeptical of the PC makers' entry into relatively foreign markets. Forrester communications analyst Amanda McCarthy said networking firms that already specialize in PBX systems are better suited to provide the technology.

"Do you really want to make PBXs? There's a bunch of companies that already make them very well, they're called Nortel and Lucent," McCarthy said.

Also ahead, 3Com representatives said the company plans to integrate VoIP into its cable modems, used by the cable industry to offer high-speed Net access. Yet cable firms are also looking to provide local phone service over cable networks. Earlier today, Comcast and Lucent Technologies announced plans to trial VoIP over Comcast's cable systems.

Smaller companies also are looking to incorporate the new technology into computer gear.

Via, a firm that makes computers that users can wear, touted its voice-over-IP capabilities this week. Via's computers are worn like a belt, and are geared for warehouse workers, inspectors or other professions in which employees need to work with a PC but have their hands free. The company's Via II voice recognition model allows users to communicate with voice-over-IP technology using a microphone headset.

"The PC industry is more familiar with IP, and now that they can put voice over it, [PC industry companies] feel they can take advantage of that," NEC's Allman said.

News.com's Stephen Shankland contributed to this report.

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