Motorola Modems -- Question of Supply

Chronicle Front Page
The Gate

Friday, March 8, 1996 · Page B1
© 1996 San Francisco Chronicle

Motorola Modems -- Question of Supply

Jeff Pelline, Chronicle Staff Writer

In November, Motorola Inc. announced a ballyhooed deal to sell ``up to'' 200,000 cable modems to Tele-Communications Inc. that will bring ``life to TCI's deployment of @Home,'' a high-speed Internet access startup.

With typical hype, the deal was leaked to a big national daily as 21,000 honchos gathered at a trade show to tout high-speed Internet access via cable, and the contract stole the show. Motorola promised shipment in the ``first quarter of 1996,'' and it struck similar deals with Time Warner, Comcast and Shaw Communications for another 250,000 modems.

But now, as the quarter draws to a close, some customers and competitors wonder if Motorola can ship enough modems to meet the surging demand, and whether the modems will be equipped with the most desired features. Despite Motorola's assurances, there are skeptics.

The problem typifies the launch of many high-technology products -- generating hype is easier than getting the right product in consumers' hands at the right time. In this instance, much is at stake -- Motorola's credibility in a potential multibillion-dollar market, not to mention cable's ability to jump into a cutthroat business as AT&T and Pacific Bell gear up with their own Internet offerings. A shortage of modems would be a big blow to cable's plans to launch Internet access -- planned for this spring.

Competitors already are circling the wagon. ``Motorola hijacked our market with vapor ware,'' said Rouzbeh Yassini, chief executive of LANcity of Andover, Mass., which has been selling cable modems for more than five years.

Yassini said he heard that Motorola's product had ``software problems and product qualification problems.'' He said LANcity had been in touch with @Home about coming to the rescue.

Motorola's customers are much less critical, but they still worry. ``The demand is not the problem -- it's how quickly we get them,'' said @Home chief executive Will Hearst. ``We want to ramp up our business.''

@Home, an alliance of TCI and Kleiner Perkins, is depending on the modems for an ``early 1996'' product launch in Sunnyvale. It is aiming for more widespread testing in April and a commercial launch in May, sources said. The price is pegged at about $30 per month. @Home is expected to rent the modems.

Customers also want modems that are powerful enough for video-conferencing -- an essential feature for many consumers.

Motorola remains bullish. ``We are on schedule,'' declared Jim Phillips, corporate vice president and general manager of Motorola in Arlington Heights, Ill. He said ``hundreds'' of the modems would be shipped in March and ``thousands'' in April from a new plant near Boston.

But is that enough? Sunnyvale has a population of more than 125,000, and there has been big demand for @Home.

Phillips conceded: ``There have been problems -- but normal things in a project this sophisticated. We're getting there.'' He said the first batch of modems will not offer the video-conferencing feature, but later ones will.

Chronicle Search
Chronicle Front Page
The Gate Home Page
© The Chronicle Publishing Company