Falling over the (Reef)Edge

WiFi LAN business continues to go through a shakeout. It is particularly brutal in the wireless switch business where too many players are vying for a tiny market. Dell Oro Group estimates that the overall enterprise WLAN market in the third quarter of 2004 was about $212 million.

However, 87 percent of that market is for “fat” access points, of the kind sold by Cisco and Proxim. The rest goes mostly to wireless switches. Look at the overall market for enterprise wireless LANs, and Cisco is still king, with 43 percent, according to Synergy. Symbol and Airespace come second and third, on 15.9 percent and 5.7 percent each.

Names like Airespace, Aruba and Colubris continue to do well, but some of the weaker players are in bit of trouble. New Jersey-based ReefEdge seems to be falling over the edge. For nearly two weeks I have heard that the company is rumored to be shutting down. Over past five days I have consistently tried to get in touch with them, with all phone calls going to a general voice mail box. The PR people have not returned my phone calls and neither has the CEO. Wi-Fi Planet says they have fired a bunch of people and changing their strategy.

ReefEdge CEO David Goretski “is emphatic they aren’t shutting down,” says Craig Mathias, principal with the Farpoint Group. Goretski called Mathias to refute rumors the Fort Lee, N.J., company was closing its doors.

Search Networking has a longish piece, except its about a week old.

“We’re continuing to support our existing customer base, while we evaluate the direction that we’re taking the company in,” CEO David Goretski said. He added that the layoffs were “not core engineering resources,” but were part of the ongoing effort to refocus the business.

In case you were wondering why I am writing about these guys is because they are part of the Fierce Wireless WiFi Top 15, emailed out today. (For some odd reason, it labels Clearwire which is a fixed wireless service provider as a WiFi company… go figure)

The big question, however remains for the venture capital community: how do you evaluate a start-up that is involved in highly commoditized business like WiFi? You leave the market to the established leaders and perhaps invest in software or a chip company? It will become increasingly difficult for VCs to put their money to work smartly since we are moving into a totally standard-driven tech world.