Faster gear boosts WLAN sales

Wireless LAN products based on draft versions of a new, faster standard helped drive up worldwide unit shipments and revenue in the first quarter of this year, according to market research company Dell'Oro Group Inc.

The IEEE 802.11g standard, which is expected to be ratified by August, allows for a carrying capacity of 54M bps (bits per second) on wireless LANs that occupy the same 2.4GHz radio spectrum used by existing 802.11b wireless LANs. It is intended to be backward compatible with 802.11b. Many vendors began shipping prestandard 802.11g products early this year, intending to make software upgrades available when the standard is finished.

The popularity of 802.11g products, which are only slightly more expensive than 802.11b, helped push wireless LAN equipment revenue up 1 percent from the fourth quarter, to US$411 million, according to Greg Collins, an analyst at Dell'Oro, in Redwood City, California. The new products are selling briskly in the small office-home office (SOHO) market, where wireless LAN growth is strongest, he added. The 802.11g products accounted for 29 percent of access points and broadband gateways sold in the SOHO market, according to Dell'Oro. That share will continue to grow over the course of this year, Collins said.

"When people go in to the store and see a higher performance product for not much more money, they'll likely go and choose G over B," Collins said.

Unit shipments of wireless LAN gear grew 6 percent from the previous quarter, but continuing price declines reduced the gain in revenue.

Compared with the first quarter of 2002, revenue was up about 17 percent, from $352 million, and unit shipments soared to 4.8 million units from 2.6 million, including network interface cards as well as access points and gateways, Collins said.

While wireless LAN sales have been growing strongly in the SOHO market, driven by falling prices, they have been flat for about two years in large enterprises, Collins said. Concerns about the security of wireless LANs and which standard to choose have caused many enterprises to hold off on the technology. Economic woes also have put new technologies on the back burner, he added.

The recent advent of WPA (Wi-Fi Protected Access), a new security specification that is stronger than the WEP (Wired Equivalent Privacy) technology already built into the 802.11 standard, should help wireless catch on in corporations, he said. Dell'Oro sees enterprise sales picking up in 2004.

The relative weakness of the enterprise wireless LAN market also has affected vendor market share, Collins said. Linksys Group Inc., a maker of SOHO-oriented network gear, last year passed Cisco Systems Inc. as the biggest vendor by revenue when it comes to wireless LAN equipment, he said. In the first quarter, Linksys showed a gain of 18 percent from the previous quarter. Cisco came in second place with roughly flat revenue, according to Dell'Oro.

Cisco hasn't overlooked the trend. Earlier this year it agreed to acquire Linksys for about $500 million in stock.

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