Compaq is fine tuning its networking division, pushing aside commodity items such as modems into other divisions and instead concentrating on selling high end equipment and services.
The move represents a significant turnaround by Compaq from its bullish attitude three years ago about the prospects for its commodity networking products. Back then it said the small to medium sized business market was ripe for picking and it expected to take a significant market share.
Compaq will shift control of its modems to its enhancements and options division, which sells other desktop goods such as monitors. Network interface controllers (NIC) and remote access products will now be sold by Compaq's server division.
"We are restructuring to give focus on the high end equipment that is coming via the Cabletron deal," said Richard Brown, networking product marketing manager at Compaq.
Compaq inherited a contract to buy $300 million worth of networking equipment from Cabletron before 2000 when it bought Digital Equipment. Compaq plans to extend the deal when it expires.
The shift in focus will mean bigger customers for Compaq, according to Brown. "The size of customer will now grow because before we could only offer edge devices. Before we were tinkering around the edge of the network. Now we can offer everything down to the core," he said.
Analysts said Compaq's decision was a wise one. "When you're looking at small hubs and small modems, it's too competitive a market and Compaq doesn't have a name there," said Clive Longbottom, strategy analyst at CSL Consulting.
Compaq does not have a good retail channel for commodity items, while they do for high end equipment and services, he added.
"US Robotics and that class of vendor have got it sewn up. You're better to go for a big solution sell where your making millions of dollars - there won't be a big margin on it but it will sell well with the Compaq name," he said.
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