Netgear's Lo: High Hopes

As CEO of Netgear, Patrick Lo has been a major force driving enterprise-class networking technologies into the SMB space. Netgear carries a wide portfolio of networking technologies and plans to unveil at least one new product a week for the rest of the year. David Soares was recently named vice president of worldwide sales, and will take on many of the duties held by recently departed president Ray Robidoux. Michael Werdann, vice president of North America Sales and Doug Thiele, director of channel sales, will both report to Soares. In an interview with CRN Editor in Chief Michael Vizard, Lo discussed trends and competition in the networking market.

CRN: In terms of the SMB networking space, what technology do you think is an emerging opportunity for solution providers?

PL: We believe that this year is the year for the switch over to gigabit to the desktop. The old concept was that 100 Mbyte is cheap and that Gbyte is very expensive and that the applications don't need it. Today there is a lot of up sell possibility for VARs that go to their customers and see how big a file each PowerPoint presentation has become. Look at the graphics that you're generating and then how cheap the Gbyte is. The new PCs that people are buying are equipped with a Gbyte interface and the new price point for Gbyte ranges from as low as $100 for a five port to less than $500 for a 16 port. I think that all this will help VARs shift the average selling price to a higher point.

CRN: How many new products will you bring to market this year?

PL: It's public knowledge that we try to introduce 12 new products a quarter. That means we try to get it in one a week. So there are 52 weeks in the year, so we will try to go for 52 new products in the year. We've introduced so far 24 in the first half, so we expect to introduce 28 in the second half. Those products will all revolve around a small-business environment basis. For example, we'll have a more secure and easier to use wireless LAN, more secure firewall with additional capabilities such as intrusion detection, antispam, antivirus policy enforcement, and Gbyte switches.

CRN: Recently, Cisco said it intends to focus more of its efforts on the SMB space. Does this worry you given their previous acquisition of Linksys?

PL: We have always worried about that since 2001, when they fired the first salvo saying that SMB will be their major focus and the created an SMB Czar and a channel program. This time around they said they are going to introduce some new products down the line and have a new channel partner program. But still they're true to their form. The channel partner has to have certified Cisco people and commit to $100,000 a year. We suspect that their definition of SMB is still much higher end than our definition of SMB. Our definition of SMB is 250 people and below.. We basically do not require VARs to make any minimal commitment and we don't need to certify them because our products are designed to make it simple to install.

CRN: How do you compete with Cisco's ever-expanding portfolio of products?

PL: We already have an existing portfolio of products that cut across wireless LANs, switches for both 100 megabit and Gbyte, firewalls and routers. And we also work with a lot of ancillary partners to generate a bigger portfolio for them. For example, we work with voice-over-IP vendors like Shortell. We work with FireTide to provide wireless mesh networks. We also work with the antivirus and antispam partners to do policy enforcement. We have a whole bunch of partners that we work with to provide a complete solution for the VARs that they can up sell their customers.

CRN: Who do you see the most amount of competition from in the SMB space?

PL: [For businesses with] between 100 to 150 users, we see the primary competition is from 3Com and [Hewlett-Packard]. We believe that we compete against these two by offering a little more features such as better stackability and more Gbyte ports.

CRN: What about in the wireless space?

PL: Across the whole market, we compete primarily with Linksys and D-Link. But in the business market we compete favorably with Proxim and 3Com. We haven't seen much of HP as of yet. And Cisco is kind of the high end of that market.

CRN: How is your approach to the wireless channel different than D-Link or Linksys?

PL: Our VARs need high-throughput devices that are very secure, easily managed and they want features such as Power over Ethernet and automatic throughput maximization. Those are the features that we put into our wireless access point. And we know that we cannot mix that with a retail, home-oriented product. So, unlike our competitors like D-Link and Linksys, we actually segregate the two product segments by totally different industrial design, totally different feature sets and a totally different channel for VARs. Our business wireless access point is housed in a metal cage with a long warranty [and] lots of features that are not sold in retail.

CRN: How big is the wireless market?

PL: The total market is probably worth about $2.5 [billion] to $3 billion dollars a year in net revenue. And we see that today as incremental dollars. The replacement of wired networks by wireless LAN hasn't really happened yet. So for VARs, it's a purely incremental dollars today over and above the wired networks. But it also says there is a tremendous new opportunity for them to go into a customer space and recommend [replacing] some of the existing wired networks with wireless networks.

CRN: Do you worry that Netgear is overly associated with wireless products at the expense of the rest of the business?

PL: We don't want people to pigeonhole us as only a wireless LAN player. That's why we keep introducing many new products such as the firewall and switches. For example, just in the month of June, we introduced five new Gbyte switches. And in the first half we introduced a total of ten of those Gbyte switches. The encouraging thing is that we continue to maintain the number one or number two market-share positions in the switch markets that we participate.

CRN: How will wireless networks become easier to manage and secure?

PL: One major security feature we're going to introduce in the late third quarter or early fourth quarter is called AutoCell technology, which can provide automatic transmission controls and automatic load balancing so VARs don't need to worry about how many access points they should put in. They should put in the maximum number of access points that the end users could afford so that they could have the maximum coverage. The other advantage of this is what we call a stealth mode security. Those access points will control the power so that wireless access will not spill over beyond the building. So people in the parking lot will not be able to see the access point.

CRN: You have mentioned firewalls as an opportunity for VARs. What can VARs expect to see from Netgear in that space?

PL: With firewalls, we believe that there's tremendous opportunity. So far we are only competing at the very low end. If we look at the spectrum today, for people providing firewalls to companies with up to 250 users, we're basically talking about us, talking about WatchGuard and SonicWall. When we look at the price points, both WatchGuard and SonicWall start at $400-$500. So there's nothing below that. We're filling that void. We have firewalls as cheap as $99 in two VPN configuration. Then we go to eight VPN with $150 and then we go to 50 VP with about $229 and then 100 VPN to about $300. Next, we are going to provide high-end firewalls up to $500 by the end of this year so we're kind of getting to the SonicWall and WatchGuard sphere. And it will include the intrusion detection capability, antivirus tools and spam policy enforcement as well. So from a feature standpoint, we'll be toe-to-toe with WatchGuard and SonicWall by then.

CRN: Will Netgear be offering any software to manage networks?

PL: By early next year, we'll also come out with management software that will manage wireless access points, the firewall and the switches, so our resellers could put together a complete solution with more software for more installations with more consulting they can sell to the customers.