Linksys finds its voice

If Victor Tsao has his way, your next broadband router could bear an uncanny resemblance to your living room telephone.

Ten months after his company was bought by Cisco Systems for $500 million, the founder of consumer networking gear maker Linksys plans to embark on an aggressive product expansion trail this year.

Beyond latching onto the digital entertainment wave with more offerings for multimedia streaming and wireless console gaming, Tsao will venture into an area where many before him have seen limited success--Internet telephony.

With the proliferation of the Web in the 1990s, the ability to make cheap long-distance calls over the Internet--based on a technology called voice over Internet Protocol, or VoIP--was often touted as the next big thing for consumers. Of little surprise, the market soon witnessed an onslaught of hardware and software that aimed to ride the Net phoning tide. However, poor voice quality and frequently dropped calls soon drowned much of the consumer enthusiasm surrounding IP telephony.

Thanks to improvements in quality of service and Internet bandwidth in recent years, VoIP has again caught the attention of telecom carriers around the world. During a recent Singapore stopover, Tsao, now vice president and general manager at Linksys, tells CNETAsia about his plans for VoIP and future directions for the company.

Q: How has Linksys changed after the acquisition?
A: There is no change to the business model. Cisco is the leader in the enterprise networking field. Linksys is a brand of Cisco, but the brand Linksys covers the other side--small businesses, home users and consumers.

As for market focus and product focus--they haven't really changed, although, yes, some things have changed. Before the acquisition, 95 percent of our revenue came from the U.S. and Canada. With Cisco's worldwide presence and infrastructure, we started branching out. We had never really focused on this, due to constraints as a privately held company.

Back on Oct. 14, we launched the Linksys brand in China. We created an entity in Chengdu, focusing on (aftermarket) sales, technology support as well as marketing and promotions.

Are there changes to your product line?
The acquisition also helps with product differentiation. Cisco is one of the few American companies with a lot of engineers and programmers in-house. During the downturn in the last two to three years, Cisco hasn't really slowed down on their product development.

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For example, in terms of VoIP product lines, it has 80 percent market share. Consider this--Linksys is getting into this market as well. If you talk about VoIP, you really don't know of any leader in the home or small-business segment. So, why not Linksys? We can start to use Cisco's intellectual property and license its products and software.

In terms of core technology for VoIP, for example, echo cancellation is a must in voice applications. Cisco uses that, so why not bring it to a consumer-grade level?

How about cannibalization? It's very easy to differentiate the products. For example, Linksys' products can support two ports, four ports, maybe up to 50 or 100 users. Cisco supports hundreds and thousands of enterprise users.

Many companies have tried to offer VoIP-based products to consumers, but they have not fared too well. Why are you confident of succeeding?
Ten years ago, we talked about VoIP as the killer application. But really, it has been killing itself over the last 10 years.

The challenge now is really how to make (VoIP) easier to use.

Now, there are a lot of applications that can't work on the analog phone--like video. They just can't do that. Three to five years ago, the technology for VoIP equipment was there, but the problem was, once you go outside your LAN (local area network), it's unpredictable. But with the infrastructure being set up in the last few years, the bandwidth is acceptable, now.

The challenge now is, really, how to make it easier to use. Don't change the user experience. Do I have to turn on my computer and plug in my headset and run NetMeeting? We must improve the user experience, and the product must also work with voice service providers.

When do you plan to launch your VoIP products?
We have a product right now--an analog terminal adapter for VoIP. Within a month or two, we will work with some voice service providers in the U.S. to launch this product. That will be the first one. A lot more products will come out in the second part of this year.

When will those products be launched in Asia?
We're looking at sometime this year. We want to try them out in the U.S. first. We want to make sure that the product can stand its ground at the service provider level. Once we have that in place, we can pretty much go anywhere.

It's finally time for VoIP. There are more products, costs are more affordable, usage is easier, plus, Wi-Fi may enable the cordless part of it.

Linksys has been strong in making consumer networking gear. With the diversification, what are the priorities going forward?
Personal computing products are absolutely bread and butter, and we will continue to drive this. Communications is No. 2, thanks to Cisco. The IP phone could be the next Linksys Ethernet router. Entertainment comes next.