Home Networking Sales Haven't Met Expectations

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Sales of home-networking kits have plodded along for most of 1999, but one vendor said broadband Internet connectivity could be exactly what the category needs to gain true mass-market acceptance.

The sluggish sales are due to a combination of consumers not understanding home networking and no compelling need for it at this point, said one industry source.

"These kits are still a product for next Christmas," said Steve Baker, senior hardware analyst for PC Data, Reston, Va. "Sales were predicted to be higher, but it hasn't happened. The issue that still has to be addressed is that there is no real reason for people to use these products."

However, this did not stop companies from introducing a slew of products at Comdex last month.

Dave Appleman, sales and marketing VP for Web Gear, said the company's sales were up for the year but did not meet expectations.

"We feel the retail excitement was there, but prices were high and consumers hesitant to jump in with both feet," he said.

Lesley Kirchman, marketing manager for Actiontec, said the real value home networking brings to the end user will not be realized until broadband Internet access becomes widely available. The primary reason people are interested in home networking is to save money on ISP costs, she said, but the $20 per month an extra ISP account costs is not enough to warrant a networking kit purchase.

However, when DSL and cable modems start making their way into homes, at a price of $50 to $60 per month, the cost model will change and consumers will start networking their PCs, said Kirchman and Appleman.

The key for retailers is properly explaining the technology to customers, said Jack Wahrman, senior merchandising manager for J&R Computer World. This task is becoming more difficult because people are better informed about home networking and coming in with harder questions.

Sales have been keeping pace with projections, and they are exceptional compared to what was taking place just a few years ago, said Wahrman. "Two years ago we didn't even have a department for network kits or anyone specifically assigned to deal with customer questions, now there is a department with four to six people working in it."

Kirchman agreed and said that making products simple to understand and install is paramount in selling home-networking products. "Consumers are inundated at this point with new technology, so we are trying to make products they are comfortable using," she said.

However, PC Data found that the vast majority of kits being bought are the more complicated Ethernet card variety. In October sales broke down in the following manner: 77.6% Ethernet, 16.2% phone line and 5% wireless.

Actiontec fleshed out its home-networking kit line with the introduction of the ActionLink 10-Mbps home-networking kit. The phone-line-based product is expected to ship in the first quarter of 2000 with a $149 suggested retail price, Kirchman said. The product comes with two PCI cards and DynaNAT software, which manages the home network by allowing any PC on the network to act as the host computer.

The software is part of the company's effort to make home networking as transparent to the end user as possible, thus demystifying the technology.

NetGear exhibited products ranging from adapter cards to full-fledged home Gateways. At press time, the company's Phoneline10X PCI home-networking adapter cards should have just arrived at Circuit City, CompUSA, Fry's Electronics, J&R Computer World and Micro Center.

The cards will have a $79 estimated street price. The remainder of the product family will ship in November. The suggested retail price of the Phoneline10X USB Adapter will be about $150, the Phoneline10X Network Bridge less than $250, and the Phoneline10X Home Gateway less than $400.

The Acer NeWeb product line gained the WarpLink USB. The wireless network has a 500-foot range and a 1-Mbps data transfer rate. Acer plans to start shipping the kit in first-quarter 2000. The cards will be sold in pairs for $199 and individually for those who wish to expand past a two-PC network.

Introduced by iRLan was the Yalo 100 USB, which creates a computer network by connecting an infrared transceiver into a PC's USB port. The product is intended for single-room networks, as the infrared signal requires a clear line of sight to operate. The network is further limited because it is only able to fill a 21 x 21-foot room. Pricing and shipping information were not available.

Enikia used Comdex as a venue to demonstrate that its power-line-based technology is capable of the same 10-Mbps data transfer speeds attained by the phone-line-based kits.

The test showed networked applications for the home of the future including streaming video, video conferencing, streaming audio, computer peripheral sharing, Internet sharing, Internet telephony, home automation, and multi-player gaming -- all connected through household power lines, said Enikia's executive VP/co-founder Bob Dillon.

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