Wireless data companies ride tidal wave of investor interest
BUYING FRENZY
Share prices of a handful of Canadian companies are
skyrocketing in the sector, which is creating an entirely
new market for equipment, software and services.
TYLER HAMILTON
Technology Reporter
Saturday, February 5, 2000
More than a dozen Canadian companies, small and large, have been riding a tidal wave of investor interest in the wireless data market -- also known as "Internet Wave II."
It's a frenzy that has given Research In Motion Ltd. a market value greater than that of Newbridge Networks Corp., suggesting investors see more potential in wireless data devices than the traditional networking equipment business. It's also the same investor enthusiasm that has more than tripled the share values of companies such as Sierra Wireless Inc., Wi-LAN Inc., Infowave Wireless Inc. and eDispatch.com Wireless Data Inc. over the past few months.
The reason for this excitement is simple: Wireless is hot. The Internet is sexy. Bring them together and you expand the mobility and reach of the dot-com economy, creating an entirely new market for equipment, software and services.
"We're very, very bullish on this sector," said Barry Richard, a technology analyst from Sprott Securities Ltd. in Toronto. "All of these stocks are just running wild. Canadian companies are doing great in wireless data, because it's an area where they have tons of strength."
Sierra Wireless, for example, has seen its stock jump 800 per cent in less than three months, from a low of $16.15 in November to its close yesterday of $128 on the Toronto Stock Exchange.
The Richmond, B.C.-based company, which was added to the TSE 300 last week, makes high-speed wireless modems that can be used in laptop computers and mobile devices. In three months, Sierra has signed supply contracts ranging between $24-million and $30-million (U.S.) with three major U.S. companies, including AT&T Corp. and Sprint Corp.
"We see Sierra Wireless as one of the leaders in the industry," said Mark Pavan, an analyst with Yorkton Securities Inc. in Toronto.
The same rise to glory holds true for Research In Motion, the Waterloo, Ont.-based maker of interactive paging devices. The company's Blackberry product, which lets users send and receive e-mail while on the go, has been endorsed by the who's who of the high-tech industry. Michael Dell swears by it. Intel wants all of its employees to use it. And Nortel Networks Corp. wants to co-develop future networks around it.
The stock, as a result, has skyrocketed 300 per cent since October and the company now has a market value of more than $9-billion (Canadian).
"The reality is that the number of cellular phones and pagers dwarf the number of personal computers," Mr. Pavan explained. "As the Internet becomes more utilitarian, and is used less for entertainment and more for practical applications, the environment will migrate to wireless."
In recent months, wireless data software and equipment developers have been signing deals and striking alliances with service providers. On the consumer side, portal players such as Yahoo Inc. have embraced the mobile environment while financial institutions have taken the lead by rolling out wireless trading and banking services.
Bank of Montreal, for example, introduced wireless stock trading last week, using software developed by Toronto-based 724 Solutions Inc., whose market value has jumped five-fold since its initial public offering on the TSE Jan. 29.
In the past week alone, a number of events and announcements have bolstered the wireless data agenda, including:
Plans by Canadian stalwart Nortel Networks Inc. and Phone.com Inc., a U.S. provider of software and services for the wireless delivery of Internet content, to co-develop wireless data technologies;
The formation in Cannes, France, this week of the Mobile Wireless Internet Forum, consisting of industry leaders including Nortel and Cisco Systems Inc. The group will co-operate to develop standards for wireless Internet applications and equipment.
The creation of a $300-million (U.S.) wireless Internet fund, set up by Argo Global Capital to help finance new wireless data ventures.
The list goes on, supporting research that indicates the wireless data sector is about to explode. In the United States alone, San Jose, Calif.-based research firm Dataquest predicts that more than 36 million people will subscribe to a wireless data service by 2003, making the market worth about $3-billion.
That's why companies such as Calgary-based Wi-LAN have emerged from relative obscurity to become a leading contender for the future development of mobile and fixed-wireless networks. Many industry observers say Wi-LAN's wideband orthogonal frequency division multiplexing (W-OFDM) technology could become a standard for future wireless networks, and the company is currently building support for that vision through an alliance of major industry players.
It's tweaked the interest of high-tech giants such as Cisco. And like many of its Canadian peers, Wi-LAN's stock has more than quadrupled in four months, rising $1.15 (Canadian) yesterday to $45.85 on the TSE.
Mark Zohar, wireless data analyst for Cambridge, Mass.-based Forrester Research, said there's no doubt wireless Internet will be the market to watch this year. But he said there's a danger in confusing the capabilities of wireless Internet technologies with what people will actually use.
"Do customers really want to have applications to buy lipstick on a mobile phone?" Mr. Zohar said. "What is the revenue model? What are the winning devices? There's huge uncertainty in this market, and as a result everyone is jumping in."
He said there's too much focus right now on trying to deliver to mobile phones the same content that a person could get through a personal computer. The mistake, he added, is to believe that just because people shop on computers means they'll want to shop while sitting in an airport or walking to a meeting.
"The information you receive has to be extremely timely and time-sensitive. It has to be very simple to execute or transact, meaning 'one click' is absolutely critical. It also has to be easy to personalize," said Mr. Zohar, explaining that wireless location-detection technologies will become increasingly important.
That puts Calgary-based Cell-Loc Inc. in a sweet position. The maker of wireless device tracking technologies has seen its stock jump from $5 in September to above $20 on the Canadian Venture Exchange.
Mr. Pavan said investors are betting on the sector rather than individual companies, essentially because nobody knows for sure who the winners are going to be. "That's why you're seeing a huge runup in these stocks."
It's also why a growing number of lesser-known wireless data players -- including eDispatch.com, Infowave Wireless and Unique Broadband Systems Inc. -- have done well by the market. It's also why a new undercurrent of private firms, such as Toronto-based Wydsom Inc., are poised to make waves in the public markets.
WIRELESS TIDAL WAVE
Research In Motion
Daily share price, RIM-TSE
Closed yesterday at $135.50, up $4.20
Sierra Wireless
Daily share price, SW-TSE
Closed yesterday at $128, down $4
eDispatch.com Wireless Data
Daily share price, EWD-CDNX
Closed yesterday at $11.50, down $1.75
Source: Datastream |
