In a move analysts say is an attempt to lock up the market, Cisco Systems teamed up with IBM, Intel, Hewlett-Packard and six other technology vendors to offer corporate customers what it says are more stable and secure wireless networks.
While the partnership, which includes Agere Systems, Atmel, Intersil, Atheros, Marvell and Texas Instruments, could mean the creation of more secure and compatible wireless LANs for companies, it could also mean more expensive local area networks, since Cisco will have made deals with most of the major players in the marketplace.
"Economics 101 dictates if there are two vendors in the market, you get better prices than if there were only one," said Sam Wilson, an analyst at JMP Securities, an investment bank in San Francisco. "But if you have 40 vendors, then prices come down faster."
Cisco is the No. 1 provider of wireless LANs for corporations. It controls 51 percent of this market, according to market research firm Dell'Oro Group.
Wireless industry analysts say what the company calls a "marketing" initiative is actually a power play.
On Monday, Cisco said it would offer key proprietary technology to chipmakers and computer vendors -- for free -- to ensure that the products of all involved are compatible with one another, and secure. Agere, Atheros, Atmel, Intel, Intersil, Marvell and TI make up a little more than 90 percent of the wireless LAN market in terms of chips in notebook, desktop and handheld computers, as well as PC cards and Compact Flash adapters.
The idea, Cisco said, was to make it easier for corporate tech buyers.
"The enterprise customer can be assured that an IBM ThinkPad will be compatible with a Cisco wireless LAN," said Bill Rossi, vice president and general manager of Cisco's wireless networking business unit.
Under the new Cisco Compatible Extensions Program, vendors whose products are deemed compatible with Cisco's network could then don a "Cisco Compatible" logo -- very similar to the one from the successful "Intel Inside" marketing campaign.
While Cisco's program could boost its image in the industry, it could also help bolster adoption of wireless LANs among corporations concerned about security holes in the technology. Incompatibility issues and, primarily, fears over security breaches have kept many companies from replacing their wired-line networks with wireless ones, analysts said.
"Best Buy shut down their (wireless) cash registers because you could sit in the parking lot and download all the credit card information," Wilson said. "Obviously standardization is a good thing for the industry."
Abner Germanow, an analyst from market research firm IDC, agreed that standardization should help speed adoption of wireless networks.
"While it helps Cisco from a branding point of view, it ought to help the market as a whole," Germanow said. "This program doesn't force anyone to buy Cisco infrastructure. What it does say is, 'Here are a number of devices that we know will definitely work with Cisco infrastructure.'"
That's not to say that Cisco won't try to force the industry to adopt its technology. Because of its prominence, the company has already persuaded its current partners to go along with the program.
Cisco is currently pushing for the industry to incorporate some of its proprietary technology into the wired-line ethernet standard simply because so many in the industry are already using it, Wilson said. Wilson said he wouldn't be surprised if, with enough momentum, Cisco makes its case before the IEEE or the Wi-Fi Alliance that some of its wireless technology should become part of the basic wireless ethernet standard.
"In traditional Cisco marketing 101, you build a coalition, sell a bunch of (your products) and then go to the standards body and say, 'You should use this,'" Wilson said.
Cisco denied it was competing with IEEE or the Wi-Fi Alliance, which has its own interoperability testing for wireless LAN products.
"We are trying to go to the next level to address the specific needs of business users," Rossi said. "Those issues will ultimately get addressed by the industry-standards effort. But those efforts need to be accelerated."
Wi-Fi Alliance chairman Dennis Eaton said his organization has never incorporated proprietary technology in the popular Wi-Fi wireless Internet standard. He said it is "very unlikely" it ever will.
"We don't know what Cisco's intentions are," Eaton said. "We are still learning about this ourselves."
Regardless, some analysts feel a little uneasy about Cisco locking up so many prominent vendors so early in the game.
Germanow said the adoption of wireless LANs in the workplace is still in its infancy.
"But the best market for the end user is standardization without vendor lock-in," Wilson said. "When you are locked into a vendor you get less flexibility in terms of pricing and service support."
At market close on Monday, Cisco (CSCO) shares fell 25 cents to $14.42.
