<Japan's Nomura, also warned recently that GPRS may be delayed
because it is proving difficult to create stable handsets and networks.>
Downgrade of ARM Signals
Skepticism About Wireless Web
By DAVID PRINGLE
Staff Reporter of THE WALL STREET JOURNAL
LONDON -- Casting further doubts on the medium-term prospects for
the wireless Internet, investment bank UBS Warburg cut its share-price
target for U.K. chip-designer Arm Holdings PLC due to the disappointing
debut of next-generation mobile-phone technologies.
Warburg cut its share-price target for ARM to 840 pence (13.59 euros,
$12.60) from 1,000 pence, citing the failure so far of WAP technology to
capture consumers' imagination. Warburg, which estimates that the
mobile-phone market currently accounts for about 55% of ARM's
revenue, also "downgraded our longer-term forecasts to take account of
the increased uncertainty associated with this revenue stream."
Shares of ARM were down 4.8% in late
trading Tuesday, as investors digested this
downbeat prognosis for the wireless Internet
by a previously bullish investment bank.
Recent figures show disappointing takeup of
WAP technology, which allows users to
access a subset of the Internet through their
mobile phones, and that prompted the Warburg rethink its forecast.
British Telecommunications PLC said earlier this month that only one in
four of its new second-quarter wireless customers in the U.K. had opted
for a WAP phone, and Vodafone AirTouch PLC said it had sold only
about 50,000 WAP handsets in the U.K. since their launch around the turn
of the year. T-Mobil's subscribers in Germany have also been slow to
embrace WAP. Analysts believe these figures reflect adverse publicity
about WAP in the wake of technical problems and a shortage of
compelling services.
Seeking to downplay the Warburg note, ARM said that it designs chips for
all kinds of digital devices and is becoming less dependent on the mobile
phone sector. "We never thought these things were going to roll out quickly
anyway," said Jonathan Brooks, ARM's chief financial officer. "I,
personally, never thought it [WAP] was going to be a big thing."
Warburg is also concerned, however, about delays in another mobile
phone technology, general packet radio services. Mobile phone operators
across Europe are planning to use GPRS software on their networks to
offer users a faster, always-on connection to the wireless Internet. Analysts
see GPRS as the key to making the wireless Internet, and WAP in
particular, more attractive to consumers.
Although both BT Cellnet, BT's wireless unit, and T-Mobil, which is part
of Deutsche Telekom AG, have already rolled out GPRS networks,
suitable mobile phones are not expected to be available in large volumes
until the first half of next year. Another big investment bank, Japan's
Nomura, also warned recently that GPRS may be delayed because it is
proving difficult to create stable handsets and networks.
But Warburg's price reduction for ARM also reflects a change in sentiment
among technology investors, who have become increasingly nervous about
new mobile-phone technologies since Finnish mobile phone maker Nokia
Corp. issued a profit warning last week on the back of delays to some new
handsets. Nokia's shares fell 21% following the warning. However, a
Nokia spokeswoman said that it had not changed its timetable for the
launch of GPRS handsets.
Some analysts further warn that third-generation mobile phone networks,
set to roll out in Europe in 2002, may also fail to live up to expectations.
Nokia told analysts in Finland recently that it believes third-generation
networks will be able to carry data at just 156 kilobits a second, rather
than the widely expected 384 kilobits a second. Joe Barrett, head of 3G
marketing positioning for Nokia, said that operators will be able to offer
higher speeds, but only if they build large numbers of new base stations. If
networks do run at speeds of 156 kilobits and less, video conferencing and
other data-intensive applications might not be feasible.
However, Nomura's Nainish Bapna remains optimistic that consumers will
still buy third-generation handsets once they become available. "They will
still be far superior to what they have now," he said.
Write to David Pringle at david.pringle@wsj.com |
