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802.11 Fights Pricing Battle

Enterprise wireless LAN vendors face a potential repeat of the pricing pressures that have ravaged the consumer market, according to the latest edition of Unstrung Insider.

The report -- “Enterprise Wireless LAN Price Survey” -- claims that intense competition combined with a lack of product differentiation threatens future vendor profit margins.

With an 802.11g (54-Mbit/s over 2.4GHz) access point costing an average of $570, Insider's Gabriel Brown claims that standalone access points are already “commodity” items, offering very little scope for pricing power or profit margins.

Multimode, standalone access points, at an average price of $840, command a premium over 802.11g products, but Brown believes it is unlikely that the market will sustain such a differential over the long-term.

“The primary conclusion is that it will be really tough for all but the most sophisticated and entrenched vendors to turn a decent profit,” warns Brown.

Despite the gloomy outlook, there are a few strategies vendors can deploy to help maintain margins.

“The successful supplier will adopt a software licensing strategy,” notes Brown. This could include offering optional software modules for more advanced wireless control features such as RF management, intrusion detection, or location tracking. Aruba Wireless Networks, Airespace Inc., Extreme Networks Inc. (Nasdaq: EXTR), and Cisco Systems Inc. (Nasdaq: CSCO) are examples of vendors that have adopted this approach.

Another tactic is to take the Symbol Technologies Inc. (NYSE: SBL) approach of lowering prices of the basic platform and making up the profit on accessories, such as handhelds and scanners.

But Brown cites marketing strategies as possibly the best weapon in the battle to maintain margins. “A dollar spent on successful marketing and sales channel development is surely far more effective than a dollar off the price of the product.”

— Justin Springham, Senior Editor, Europe, Unstrung

"Enterprise Wireless LAN Price Survey" is available as part of an annual subscription (12 monthly issues) to Unstrung Insider, priced at $1,350. Individual reports are available for $900.

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