Xircom Sees Intel Ties Aiding Battle With 3Com

Xircom Inc. in Thousand Oaks plans to use its new relationship with computer-chip powerhouse Intel Corp. to develop products that challenge its biggest competitor in the Ethernet communications market, Chairman Dirk Gates said.

Last month, Intel bought a 15% stake in Xircom in an effort to boost its share of the networking market, especially in the laptop business.

Together the companies plan to develop connection cards that will tap the rapidly growing Ethernet market, which connects laptop personal computers to each other, to networks and to the Internet, the Xircom chairman said.

“Ninety percent of our revenue comes from connecting notebooks to networks,” Gates said at a recent forum. Since sales of laptop personal computers “are still going gangbusters,” major gains are expected from selling those connectivity products, he said.

Xircom holds about a 50% share of the market for credit card-sized devices that connect PCs to local-area networks and modems, Gates said. A few years ago the company held almost 70% of the Ethernet adapter market, but Xircom “lost focus” and Santa Clara-based 3Com Corp. “came in and taught us a lesson,” Gates said.

While Xircom and Intel don’t plan to ship their first jointly developed connection cards until late this year or early 1998, Gates said they will work hard to boost market share and put pressure on 3Com.

“I’m not looking for higher profits,” said Gates, who founded Xircom. “We’re being very price-aggressive in this space.”

Gates said Xircom plans to ship its new generation of connection cards as early as 18 months before 3Com does.