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Friday, November 05, 2004 4:13:03 PM
By Chris Kraeuter, CBS.MarketWatch.com
Last Update: 3:56 PM ET Nov. 5, 2004
http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&gui...
SAN FRANCISCO (CBS.MW) -- Agere Systems will debut two networking chips Monday devoted to Gigabit Ethernet, a technology that helps shuttle information quickly around the Internet.
Agere's (AGR.A: news, chart, profile) newest products mark its most significant attempt yet to break into the Gigabit Ethernet market against entrenched competitors Broadcom (BRCM: news, chart, profile), Marvell Technology (MRVL: news, chart, profile) and Vitesse Semiconductor (VTSS: news, chart, profile).
The new chips are used in networking switches sold by equipment manufacturers. Such switches filter and forward packets of information across the Internet. Allentown, Pa.-based Agere makes networking chips used for data storage, wireless and computing applications.
The company has set a goal to capture 2 percent of the Gigabit Ethernet chip market in 2005 and 10 percent in three years, said Ed Roberts, general manager of Agere's Ethernet division.
Agere has lined up two major Asian design companies, Accton Technology and Delta Networks, to use the new chips. Accton and Delta's customers include 3Com (COMS: news, chart, profile), Hewlett-Packard (HPQ: news, chart, profile) and Nortel Networks (NT: news, chart, profile).
Gigabit Ethernet technology can transfer data at a rate of 1,000 megabits per second, compared with Fast Ethernet, which has a transfer rate of 100 megabits per second, and Ethernet, which transfers data at 10 megabits per second.
Most networks operate on Ethernet or Fast Ethernet technology with a transition currently under way to Gigabit Ethernet.
Agere said its chips are different from competitors' offerings because they're more highly integrated, which reduces costs and power consumption.
Its newest chip, the ET4001, can accommodate 48 data ports and works in conjunction with its other new chip, the TruePHY ET1081.
A circuit board for a switch would only need seven Agere chips, compared with 17 comparable chips from competitors, according to the company.
"This certainly is significant for Agere," said Seamus Crehan, a research director at Dell'Oro. "They haven't had that big of a presence in the Gigabit Ethernet market yet, and they've made a number of acquisitions to help them get the teams and technologies to make this happen."
The chips come out of Agere's purchase in August 2003 of Massana for $26 million, as well as the January buy of TeraBlaze for $21 million. Roberts said his Ethernet team now has about 200 employees.
He added that Agere will get revenues from the chips this quarter, but wouldn't be more specific beyond his market share targets.
Crehan said these chips address an installed base of $450 million worth of Fast Ethernet ports, all of which have the potential to be replaced by Gigabit Ethernet.
Lower cost components will help speed the adoption of Gigabit Ethernet, the researcher added, and volume shipments will be more significant through 2005 with peak shipments in 2006 and 2007.
Agere's newest offering appears to drop the price per data port down to almost twice the cost of a Fast Ethernet port, Crehan said. "If they get less than two times per port on a like-for-like device, that should trigger strong adoption."
Likewise, analyst Roy Rubenstein with RHK Research, a consultancy and boutique investment bank, said Gigabit Ethernet is the place to be right now for chips used in networking switches.
The number of ports that Agere is addressing through one chip is a significant jump in capability for the market, he added, and others are moving in that direction. "There are a lot of players jockeying for position right now," Rubenstein said.
Chris Kraeuter is a reporter for CBS.MarketWatch.com in San Francisco.
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