Rockwell hits snag on 56 kbps

While U.S. Robotics' (USRX) 56-kbps modems have already landed in stores en masse, some modem companies using Rockwell Semiconductor's (ROK) competing K56flex technology are holding back shipments due to problems with chipsets.

Rockwell says it won't resume volume shipments of chipsets until sometime next week, after the new quarter begins. Wider availability of K56flex-based modems won't be seen until the second week of April at the earliest, according to some vendors.

"Frankly, the performance is poor. We absolutely know that because of our testing. There are significant issues still getting worked out," said Frank Manning, president of Zoom Telephonics, explaining why his company hasn't yet shipped K56flex-based modems. Zoom's products require only a software upgrade, but Manning says the company wanted to make sure the products worked well before shipping and now hopes to have products available by the end of next week.

While the problems have disappointed Manning, he said he is still convinced that the K56flex technology will win in the long run because Rockwell chipsets are already in most central site equipment. The technology is incompatible with the x2 56-kbps technology from U.S. Robotics; users must connect to a service provider using compatible technology in order to see faster speeds.

Rockwell first revealed the problem two weeks ago, and has been working since then to improve performance. The problem is related to the firmware, which is programmable like RAM except that it holds instructions when the power is turned off. Central site equipment used by online service providers is not affected because shipments of software upgradeable RAM-based chipsets has not begun yet.

Motorola (MOT), which originally detected the problem, has not yet said when it will resume shipments.

Diamond Multimedia said it will start shipping modems this week. The company doesn't need to wait for any chips, but rather a software upgrade from Rockwell because its 56-kbps modems were designed differently than Motorola's.

"We've worked with Rockwell closely, and we have their latest release of product built into our modems. We expect Rockwell to continue to enhance that, as they always do. There are a number of ways of providing those enhancements over time," said Mike Reed, product line manager for Diamond Multimedia.

The company intends to make software downloads available on its Web site as well as through the use of "push" technology that can directly send the downloads to the customers via the Internet.

Boca Research (BOCI) started shipments of modems earlier this month and then stopped once problems were recognized. Shipments won't resume until next Monday at the earliest. The delays are likely to affect financial results for all companies involved, as much because people are waiting for the new technology to appear as for any production delays.

"The issue for us as a company is that a delay in chipset shipments won't make or break us because the quarter has already been hurt by the transition [to the new technology]," said a spokeswoman for Boca. She added that people have been waiting for the new technology and stopped buying slower standards-based modems in the meantime, which has hurt both fourth-quarter 1996 and first-quarter 1997 financial results for a number of companies.

The delays affecting Rockwell customers have not yet hit Lucent (LU) customers. Lucent manufactures its own chipsets, although its products are interoperable with Rockwell's technology. Lucent says it has shipped chipsets to customers, but products based on these chipsets have yet to reach store shelves. The company says it has also shipped many upgradable chipsets in Compaq computers that will be upgradable to K56flex technology, but haven't shipped the software upgrades yet.

"There's always a few hiccups with new products. We're just trying to make sure we test carefully before we come out with our products," said a spokesperson for Lucent. Compaq, IBM, Xircom, 3Com, and Livingston are among the companies that have announced they are using Lucent chipsets. Some Lucent customers such as Hayes also have products that use Rockwell chipsets.