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Home networks answer the call

Two new products that link home computers via telephone wiring steal market share from Ethernet products.

After a year of hype about home networking as the next huge trend, consumers have begun to warm up to the new technology, which lets them easily connect their home PCs together and share Internet access.

Two new products from Intel and Diamond Multimedia that link PCs and peripherals via telephone wiring have recently approached the top of the market, taking some market share from the trenchant Ethernet technology. It may be just the beginning.

The networking market for small offices and home offices has historically been dominated by Ethernet--the classic but sometimes esoteric computer-networking technology. But the new wave of networking kits--aimed at home users--are easier to use and require no extra wiring.

While four Ethernet-based kits, led by Linksys, rank in the top four, two recently released phoneline consumer-oriented kits by Intel and Diamond Multimedia placed fifth and sixth in the total number of products sold this May, according to market research firm PC Data, which tracks sales of hardware and software from 20 retail and mail-order outlets.

The lion's share of sales was for Ethernet-based kits, which totaled 95 percent of the market. The rest is a mix of wireless and power-line products, according to the study.

Power-line alternatives allow people to connect PCs through electrical outlets. But in the last five months, phone-line technology has stolen some market share.

Out of 250,000 units sold in May, Ethernet-based kits dipped to 73.7 percent of the market, while phone-line products shot up to 22.1 percent. Wireless technology from Proxim and others had 3.2 percent, and a power-line kit from Intelogis was last with 1 percent.

Analyst Steve Baker, of PC Data, said most buyers of home-networking products today are early adopters, but the good showing by Intel and Diamond means home networking is not just hype.

"The majority of the business is still a standard Ethernet setup," Baker said. "But phone-line looks real strong right off the bat."

Most analysts believe home-networking will take off once faster Internet access through cable modems and digital subscriber lines (DSL) is more readily available. In fact, a recent Cahners In-Stat Group study expects the U.S. home networking market to reach $230 million by 1999 and jump to $1.4 billion by 2003. It predicts that phone-line technology will capture 50 to 70 percent of the market, wireless will take a third, leaving power-line products with less than 10 percent.

In May, Intel and Diamond cracked the top six list of networking kits sold. Intel's AnyPoint product had 6 percent of the total networking kit market, while Diamond's, now owned by S3, had 4.5 percent. Above them were two Linksys products with 32 percent of the market, D-Link with 14 percent and NortelNetworks' NetGear with 13 percent.

Baker believes the new technologies will make a bigger impact late this year or early next year once people figure out what kind of broadband access they want and when more companies, such as the 3Com and Microsoft alliance come out with their phone-line and wireless products.

"If you ask people why they're doing this, I suspect it's to share Internet access," Baker said. "We're in the midst of a big competition, 'Should we choose DSL or a cable modem? Or should we stay on the phone?' There's a whole bunch of things banging up on each other that makes some of these decisions difficult. They don't want to network their homes if they don't know if they're going to have DSL or cable."