Cisco and 3Com have an aggressive competitor on their hands in Intel

While it is fashionable in the venture capital community to talk about the “saturation” of the enterprise network market, or the slowing of innovation there, there’s one big industry player that doesn’t buy into the notion: Intel.

Under CEO Craig Barrett, Intel is quickly transforming itself from a microprocessor company into a beefy contender battling Cisco and 3Com in the market for medium-sized and small corporate nets.

Although revenue from traditional microprocessors dominates Intel’s balance sheet, there is a rapidly growing contribution from network products — from communications chips and server components, to adapter cards, routers, switches and remote access gear. Intel is bolstering its high-end offerings with a gigabit data centre switch and rolling out new routers for small offices.

Intel has an array of management tools and voice/data integration offerings. It is even branching out into services such as Web hosting.

Virtual private networks (VPNs) are key for Intel. The firm plans to build on the technology it acquired with remote access pioneer Shiva to create integrated voice/data access devices that help companies carve out VPNs over the Internet or other networks.

Intel’s design is to use its powerful brand name to dominate the network market. The company is also using its vast financial resources to make acquisitions that strengthen the attack, including the buyouts of Shiva and computer-telephony expert Dialogic, and deals for communications processor companies Level One Communications and Softcom Microsystems.

As one Intel executive stated in a recent meeting, “We want to be the building block supplier to the Internet economy.”

Put otherwise, Intel will sell all kinds of picks and shovels to the companies getting in on the Internet gold rush.

Intel is not likely to challenge Cisco any time soon for the Internet core or Fortune 100 nets. But Intel is the strongest challenge to Cisco for the rest of the network world. 3Com wrestles with organizational and focus issues that Cisco, with its own powerhouse brand, will exploit.

One wild card here is Hewlett-Packard. Networking has always seemed an also-ran within HP, although the firm has become more aggressive on price in the switching market. If new CEO Carly Fiorina sets her mind to networking, we could see a delightful donnybrook among HP, Cisco and Intel in the new millennium.

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