The decision by AirFlow Networks to scrap its wireless LAN switch might be the first tremor in an expected shakeout of this market, according to analysts.

The company, which launched its switch last September, decided it would be too expensive, and too risky, to compete with a flock of other similar start-ups. Instead, it will try to license its software to former rivals, as well as Ethernet switch vendors and WLAN chip makers.

"There's going to be some consolidation," says Aaron Vance, a senior analyst with Synergy Research Group. "The market is just not going to be able to support all of these companies." He believes the move to software makes sense for Airflow, and should enable it to better exploit its VoIP over WLAN and other intellectual property.

Because most WLAN switch vendors are privately held and reveal few financial or other numbers, it's difficult to know the financial health of the WLAN switch vendors. WLAN switches made their debut last year, but researchers have been frustrated in getting shipment numbers, leading to suspicions on their part that not many units are being bought. Last year, those suspicions were heightened by bad news from two Wi-Fi switch vendors.

"I've sent surveys out to the WLAN switch guys for the last few quarters, with only Symbol and Aruba agreeing to report," says Gemma Paulo, senior analyst with In-Stat/MDR. Symbol, which is a publicly held company, reported shipping 3,200 switch units in the fourth quarter of 2003, up from 2,145 in the third quarter. Aruba said it shipped 176 units in the fourth quarter, up from 74 in the third.

Cisco Systems doesn't actually sell a WLAN switch, but is considered the dominant player in enterprise WLANs given its 36 percent to 45 percent share of the high-end access point market in the latter half of last year, according to Synergy. Plus, Cisco plans to enable its traditional switches to handle wireless traffic. Extreme Networks, Foundry Networks and other established switch makers have already done this.