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Cometa might give Intel Nework the needed boost
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Tuesday, December 10, 2002
Having bet much of its communications IC push on the wireless LAN market, Intel Corp. last week struck a sweeping agreement with IBM Corp. and AT&T Inc. to deploy WLAN access points throughout the United States.
The three industry giants, together with investments from Apax Partners and 3i, created Cometa Networks, which expects to establish a presence in 50 U.S. metropolitan areas. Working with large retail chains, hotels, universities, and real estate firms, Cometa plans to activate as many as 20,000 WLAN access points, or "hot spots," by 2004.
"Through Cometa's relationship with Intel, we will be able to coordinate our service offering with the latest and most advanced WiFi technologies," said Cometa president Lawrence Brilliant, whose goal is to site hot spots within a five-minute walk in urban areas and a five-minute drive in rural settings.
Financial details of the Cometa deal were not disclosed. As part of the agreement, AT&T will provide network infrastructure and management, while IBM will oversee wireless site installations and furnish back-office systems.
WLAN continues to evolve as an important piece of Intel's multibillion-dollar communications IC investment. To date, the communications thrust has shown mixed success and is expected to result in an operating loss of about $700 million this year.
Since Intel began breaking out results of its two communications IC businesses in 2000, through the third quarter of this year the company has reported an operating loss of $714 million on revenue of more than $14 billion. That doesn't include the billions of dollars Intel has spent acquiring communications-related companies.
"Intel will lose as much money as some of their competitors have in revenue this year," said David Wu, an analyst at Wedbush Morgan Securities in Los Angeles. "I think there are things that Intel is working on that really won't show results until 2005. If they can improve their execution, they eventually will succeed, but there is nothing that says Intel is destined to be successful."
But the creation of Cometa should provide Intel with a ready-made outlet for its WLAN chipsets, expected to begin shipping early next year.
"They've been using a brute force approach up to this point, and that's slow-going and expensive," said Bill McClean, an analyst at IC Insights Inc., Scottsdale, Ariz. "With the exception of flash memory, they're having a difficult time edging into the communications market."
In announcing the creation of Cometa last week, the companies named Theodore Schell, a general partner of Apax Partners, chairman. Schell said there is no guarantee that Intel will be the exclusive provider of semiconductors to the effort but will be Cometa' first choice "all things being equal."
Cometa, which will have offices in San Francisco and New York, will provide WLAN technology to telecommunications companies, ISPs, cable operators, and wireless carriers.
"I think a partnership like this sounds strong and is a good way to spur Intel's sales," said IC Insights' McClean.
By: DocMemory
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