Microsoft Stops Making Wi-Fi

By Eric Griffith

May 11, 2004

Updated: The company is pulling the plug on its lines of networking products for the home, planning to focus on putting Wi-Fi in products in other divisions.

Microsoft is pulling out of the Wi-Fi home networking hardware business.

The software giant takes knocks occasionally for its operating systems and office suites, but they've got a pretty good track record with hardware such as keyboards and mice. The company's Wi-Fi product lines were no different.

Microsoft first went wireless in 2002 with 802.11b products and finally moved to the faster 802.11g in late 2003 -- months after the competition, a move which might have hurt it in sales. Yet Synergy Research Group analyst Aaron Vance calls it a "pretty safe assumption" that Microsoft was in the top five player in home wireless networking sales in the United States. The company didn't offer up sales figures to firms like Synergy, so sales were placed in the "other" column.

A company spokes person confirmed today that Microsoft's sell-through of its 802.11g product line was strong, but that the company, having "raised the bar for the industry" when it comes to ease-of-use and security for home networks, would now be scaling back. The company has no more plans to develop more wireless LAN specific devices. Instead, it will use what it learned in the experience by building Wi-Fi into other future hardware devices.

Vance says that the reasons might be more monetary in nature. "Margins in software are good, but not in hardware. And the competition is stiff. With Linksys being acquired by Cisco, the writing was on the wall that Microsoft couldn't dominate this market." Linksys is the number one seller of home networking products in the US according to Synergy's research.

Microsoft was selling an entire suite of 802.11g products, including a base station (router), adapters (USB, PC Card, and PCI card). The 11b product line included a base station, PC Card and USB adapter. They even offer wired Ethernet products (base station, switch, PC card, PCI card and USB).

Production of all of these products will now cease. However, the company will continue to honor the two year warranty and will provide tech support on all of the products based on the date of purchase. They plan to continue to sell the products until they burn through the current inventory. All are still listed at the Microsoft Hardware Web site, and can be purchased from retailers including CompUSA, CDW, Best Buy, Buy.com, PC Connection and others. The 11g base station sells for as low as $43.94 (at Amazon.com).

The exception in Microsoft's plans is the Ethernet-to-wireless adapter designed specifically for the Xbox that could be configured right through the Xbox on-screen interface. That unit will continue to be sold and updated, though Microsoft doesn't know yet what division of the company will inherit the product.

Vance says keeping the Xbox Adapter around "makes sense. It's an accessory to their gaming portfolio... they'll start to get more success with that as gaming takes off more in the U.S." This could be jumpstarted by news today that Microsoft and Electronic Arts have settled a feud which kept popular EA games off the Xbox Live online service. Fifteen EA games will be released to use Xbox Live in 2004.

The initial Microsoft 802.11g products -- the base, PC Card and PCI card -- used 54g chips from Broadcom .



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