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HP drops cable modem business

Hewlett-Packard drops its consumer cable modem business and refocuses on core strengths.

Tech Industry
Hewlett-Packard has jumped out of the consumer cable-modem business.

As part of a strategy to refocus its data services business, HP announced this week that it is shutting down its two-way cable modem operation, which was geared toward the consumer market.

Specifically, HP is canceling plans for QuickBurst cable modem products and any future plans for Kayak digital set-top box products. The company said today that the move did not result in layoffs.

"We're focusing on our long-standing strength in servers, PCs, printers, and test and measurement equipment," said Bill Hahn, operations manager for HP's interactive broadband program. "We think this is a great market, but we [can no longer wait] for it to emerge."

HP said that it hopes to integrate card-based cable modems from the leading vendors, who are no longer its competitors, into HP servers, PCs, and printers.

According to analysts, the cable modem market has shifted since HP entered the market. The industry has switched to "telco return" modems, which allow the end-user to receive information and content over coaxial cable but send data using a regular phone line.

"The cable companies are finding that it's really expensive to upgrade their networks to support the two-way modems," said Wen Liao, a senior analyst for Jupiter Communications.

Another problem was that HP was focusing on consumers, which Liao said is not showing as much potential as the business market.

The trend toward the business market is underscored by @Home's national rollout in April of @Work, a system designed to supply Internet access over cable to business customers in more than 50 U.S. cities. Before the rollout, @Home had focused on the consumer market.

The cable modem industry is hypercompetitive, making it hard for HP to step outside of its core strengths and become a big player against Motorola, U.S. Robotics, and Toshiba.

"I think this is a case of HP sticking to their knitting. It was a smart move to get out now," Liao said. "What really matters at the end of the day is whether consumers are buying."

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