Cisco Bolsters Its WLAN Hand
Between them, the seven silicon sign-ups – Agere Systems (NYSE: AGR/A), Atheros Communications, Atmel Corp., Intel Corp. (Nasdaq: INTC), Intersil Corp. (Nasdaq: ISIL), Marvell Technology Group Ltd. (Nasdaq: MRVL), and Texas Instruments Inc. (NYSE: TXN) – accounted for about 90 percent of the 802.11 chipset market in terms of units shipped in 2002, according to research from IDC.
The remaining slice of the market is accounted for by Broadcom Corp. (Nasdaq: BRCM), which is planning to join the program but is "still working out contractual issues," according to Jeff Abramowitz, senior marketing director of Broadcom's wireless LAN business.
So what's the deal for the chipset firms? Basically, the "Cisco Compatible Extensions" program allows these silicon makers to integrate Cisco "features" into their chipset designs, whether for embedded products (PCs, PDAs) or standalone devices (WLAN cards). The only cost is in testing their products for compatibility with Cisco's WLAN gear, but no money is paid to Cisco itself.
The whole program is also supported by two key PC companies – IBM Corp. (NYSE: IBM) and Hewlett-Packard Co. (NYSE: HPQ) – and Cisco expects more OEMs to follow suit. Any products incorporating the relevant functionality will be able to carry a "Cisco Compatible" brand, in much the same way as Intel products carry the "Intel Inside" brand.
All very neat, then. However, these "features" – the most important of which involve the security of 802.11 networks – will only work with Cisco's wireless LAN equipment, as the capabilities are "pre-standard" [ed. note: most people call that proprietary] and therefore only found in Cisco's networking kit.
Jon Hindle, strategic technology manager of mobile networking at Cisco in the U.K., says the main aim is to stimulate the overall uptake of wireless LANs by enterprise customers, as companies will feel happier about deploying 802.11 equipment if they believe the key issue of security can be addressed. "The main feature is called TKIP, or temporal key integrity protocol," Hindle says. "This cycles the security keys quicker than they can be broken by anyone attempting to hack a Cisco 802.11 system. This is a security method that we are pushing to be part of the industry standard, and once that specification is agreed we will modify our software to make it compatible with the agreed standard."
Cisco's main aim, says Hindle, is to provide the sort of features that users want now, without having to wait for an industry body, in this case the Institute of Electrical and Electronics Engineers Inc. (IEEE), to complete the standards process. "We are trying to stimulate the market and encourage companies to deploy wireless LANs. We are not trying to lock companies into our equipment. As soon as there is a standard, we will make sure our products are compatible."
By the time such features become standard, eliminating Cisco's functionality advantage over its competitors, it aims to have developed other applications that will keep its 802.11 network kit a cut above the rest. This is crucial, because as prices fall, functionality is increasingly the key differentiator between vendors. In order to maintain its number one position – Cisco owned 31.5 percent of the $809 million enterprise WLAN market in 2002, according to Synergy Research Group Inc. – the networking giant believes it needs to offer enhanced features ahead of the rest of the market. However, to make these features relevant, enterprise users need to be able to buy devices, such as laptops, that can make use of such functions. Which is where this program comes in.
Industry analysts are supportive of the move. "This will help to drive the 802.11 market, as well as drive the uptake of Cisco's networking equipment," says IDC semiconductor market analyst Ken Furer. "It addresses some of the security issues for IT managers, and will help them become more comfortable with the idea of deploying a wireless LAN. Of course, it's good for the chipset vendors too, as they get a free license to use Cisco software."
Aaron Vance, an industry analyst at Synergy, sees this as a boon to enterprises that are already using Cisco's wireless LAN equipment, as it will mean more products on the market that support Cisco's specific features. Surprisingly, he doesn't believe it will have a major impact on Cisco's market share. All Vance would say was, "There may be some indirect benefits from better branding."
— Ray Le Maistre, European Editor, Unstrung