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Proxim hears wedding bells for home networking

Proxim Technologies scoops up Netopia for $225 million in a deal that joins two companies dedicated to the home networking market.

Wireless home networking company Proxim Technologies continued its shopping spree this week with its biggest score yet, a $225 million purchase of fledgling DSL gear maker Netopia.

The deal joins two companies dedicated to the home networking market, though serving different niches. Proxim specializes in wireless networking kits for the home and businesses, while Netopia sells DSL-based routing equipment to consumers and businesses, as well as the broadband Internet service providers with which they sign up.

Netopia has been struggling of late. The Alameda, Calif.-based company disappointed Wall Street with its last quarterly earnings. Analyst expected Netopia to post 17 cents per share for the quarter, but it only managed 4 cents per share. The company blamed financing problems on some of its customers, which include companies that provide DSL (digital subscriber line) services to businesses. A company representative declined to give further details.

But when joined, the two companies could offer an interesting mix of wireless and wired technologies. Some of the more immediate product plans include, by year's end, a single box that will contain both a DSL router, which Netopia specializes in, and a radio transmitter from Proxim to connect just about any Internet-enabled device in a home, company executives said.

Proxim Chief Executive David King said to watch for further developments from the company in the voice-over-DSL field, which allows an ISP to provide phone service over the same line it sells for high-speed Net access.

Netopia just last week launched a device that can send data and voice over DSL simultaneously. King said the new entity plans to take that technology wireless using Proxim's know-how.

But some analysts are wondering about the combination. WR Hambrecht analyst Tim Savageaux said in a report that the deal "leaves us scratching our heads on several fronts."

"These companies are clearly in two different markets today," he wrote. "The synergeries could materialize, but are not obvious or near term."

Other products in development from the new entity include a wireless home phone equipped with HomeRF, a wireless standard that has been adopted by seven companies, including Proxim, Compaq, IBM, Intel and Motorola.

Company executives say the merger hopes to take advantage of a softening PC market. With prices of home computer dropping, the number of homes with multiple PCs is on the rise, according to a number of industry projections.

"We've seen a huge demand for (DSL and cable modem) equipment in the residential market," said Alan Lefkof, Netopia's CEO. "There may be a PC in one room, and a laptop in another. The DSL is connected to the PC, but how do you get it to your laptop in another room?"