Virata Corp.'s $315 million stock purchase last week of Excess Bandwidth Corp. will provide the company with significant capabilities in the rapidly emerging symmetric DSL (SDSL) market for telecommunications-equipment applications. The acquisition is expected to be completed in the third quarter.
SDSL technology allows for the back-and-forth digital transfer of voice and data."Excess Bandwidth's symmetric DSL technology opens up a whole new addressable market for us, especially for central-office lines that send and receive large amounts of data," said Charles Cotton, chief executive of Virata, Santa Clara, Calif. "Also, the acquisition enhances our growing arsenal of DSL solutions to offer our customers both asymmetric and symmetric solutions."
In the DSL market, ADSL is only half the equation, said Kim Funasaki, an analyst at IDC in Mountain View, Calif. "The acquisition will enable Virata to become one of the few players that's strong in both asymmetric and symmetric DSL, a market in which GlobeSpan is currently the leader," Funasaki said.
"Excess Bandwidth is also developing g.shdsl solutions, an emerging standard that will dominate the SDSL market in a couple of years, replacing SDSL and even HDSL2 to some extent," she said. "This standard integrates the best of both: It's a rate-adaptive technology that trades off speed and reach."
Excess Bandwidth will benefit from Virata's business model, which combines chips and software for its telecommunications-equipment customers, said president and chief executive Steve Dines. "Our symmetric DSL PHY technology, combined with Virata's communications and voice processors and software, will [enhance our offerings] to equipment customers designing high-performance, cost-effective SDSL solutions."
Excess Bandwidth, Cupertino, Calif., develops advanced algorithms for high-bandwidth communications applications and focuses on SDSL. The company has 50 employees and will continue to operate out of its Cupertino office, according to Virata.
Virata is now well positioned to offer components and services for DSL-modem applications, according to Funasaki. "Virata has expertise in offering what their DSL customers require," she said. "In voice, they offer communications processors, voice processors, voice-over-DSL, as well as integrated access devices."
As late as last year, demand for DSL languished as suppliers waited for digital-modem subscribers to switch from dial-up analog equipment and modems, which are reportedly 100 times slower than DSL connections. But earlier this month, an FCC mandate went into effect ordering local telephone companies to share their lines with DSL providers.
The mandate, Funasaki said, will have a "significant effect on the DSL market" by driving prices down as more DSL providers gain market share and consumers become more aware of DSL's advantages.
The FCC mandate will "turn things upside down in the DSL market in the United States," Virata's Cotton predicted. "The unbundling of the local loop is really what is driving DSL applications there, and the service providers will shortly lower costs and gain market share."
Cotton also noted that Virata is ramping up for voice applications. "The opportunity definitely exists for suppliers to offer DSL components that equip voice in addition to data, as an alternative to traditional telephone connections," he said.