Cebit Bluetooth Redherring-news summary:
Bluetooth gleams at CeBIT
By Lawrence Aragon
Redherring.com, February 28, 2000
Big-name backers of the new Bluetooth short-range wireless standard joined in a love fest at Europe's largest technology trade show this week, but startups and VCs say lots of cool Bluetooth activity is going on behind the scenes.
A flurry of announcements came out this week at CeBIT, Europe's largest tech show. Ericsson (Nasdaq: ERICY) showed off a wireless screen phone that uses Bluetooth to deliver email and Internet access over a phone. Palm ran a demo showing one of its handheld devices remotely accessing a PC and trading messages with another device. Alcatel (NYSE: ALA) joined the fray of chip makers with a single-chip Bluetooth solution. And a bevy of partnerships were announced, such as a venture between Fuji (Nasdaq: FUJIY) and Nokia (NYSE: NOK) to transmit still images between digital cameras and mobile devices.
With so much activity, you might get the impression that Bluetooth products are right around the corner. Actually, that's what Bluetooth proponents were promising just last year. But analysts say the market won't take off for at least another year. For example, the Alcatel chip won't ship in volume until early 2001, and Palm won't ship anything until the "second half" of this year, and it hasn't committed to delivering a device with Bluetooth embedded in it. (The prototype it showed at CeBIT was a clip-on peripheral.)
The slower rollout should benefit startups aiming at the space. For example, Neosilicon, started just two months ago, expects to ship a low-cost all-in-one chip in volume in 2001.
Venture capitalists that target the wireless space say they are bullish about the opportunities for startups, despite the behemoth companies that lead Bluetooth initiative. Besides Neosilicon, which is backed by $7.2 million from Norwest Venture Partners and Bessemer Venture Partners, at least two other startups are hoping to make big bucks from Bluetooth.
Comventures is backing Rangestar, a company that has developed a Bluetooth antenna in addition to a variety of other antennas. And Crosspoint Venture Partners is backing Microlink, a one-year-old company developing low-cost radio frequency (RF) chips for short-range communication.
ROOM FOR THE LITTLE GUY
"Even with larger players out there, there are always interesting places for startups to make a contribution," says Rich Shapero, managing partner of Crosspoint.
Adds David Tahmassebi, CEO of Neosilicon, "The bigger companies are more financially result oriented, so they're focused on basically developing products using their current technology process. Smaller companies can take the risks to do technology breakthroughs."
Entrenched companies backing Bluetooth acknowledge that they can't do it all. "There will be an opportunity to do a wide variety of things, and Palm won't be able to do it all," says David Christopher, product line manager in Palm's Consumer Products Group. More than 40,000 developers write applications for the Palm platform now, and that group "will dream up stuff that Palm couldn't dream up," he says.
THAT'S THE 'TOOTH
Bluetooth is a new standard aimed at making it simple for handheld devices, phones, PCs, and other computing devices to talk to each other wirelessly. The systems communicate via a tiny, 2.4 GHz radio embedded on a chip.
Bluetooth is supported by more than 1,500 companies, including 3Com (Nasdaq: COMS), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Lucent Technologies (NYSE: LU), Microsoft (Nasdaq: MSFT), Motorola (NYSE: MOT), Nokia, and Toshiba. The companies, all part of the Bluetooth Special Interest Group (SIG), last summer released the first Bluetooth specification, a blueprint for companies to follow when developing Bluetooth products.
Backers originally said Bluetooth products would be available in the second half of this year. Now it looks like they won't be widely available until next year. One of the key reasons for the delay is that Microsoft didn't throw its support behind Bluetooth until December, says Martin Reynolds, an analyst for market researcher Dataquest. "What's missing is all the software," he says. "For the longest time Microsoft didn't have interest because they had to put their (Bluetooth) patents in the pool (with others in the Bluetooth alliance). Without Microsoft, there is no operating system support."
Now that Microsoft is on the bandwagon, it will take about a year for a meaningful number of software applications to hit the market, Mr. Reynolds says. It will take another six months before "the brakes are off, and the software and hardware come together," he adds.
SAVING GREEN
The other issue delaying rapid adoption of Bluetooth is the high cost of chips that enable Bluetooth. Single-chip solutions costing as little as $10 won't be available until 2002, and the cost won't decline to $5 per chip until late 2004, according to Joyce Putcher, director of converging markets and technologies for the Cahners In-Stat Group.
Startups could play a key role in making Bluetooth happen sooner by delivering low-cost chips. Neosilicon, for example, is working on a radio frequency (RF) CMOS chip. (CMOS is the least costly chip available on the market.) "If we are successful in what we're doing, I believe that the devices our chips will go into [such as Bluetooth products] will take off like a rocket," Mr. Tahmassebi says. "They will be at the price points where consumers will buy en masse."
"Once you develop an RF solution on a single chip, your bill of materials goes down, your bill of assembly goes down, and testability is easier," he continues. "The basic cost of goods out the door is tremendously decreased."
Like Neosilicon, Rangestar aims to outsmart its larger competitors. It has developed a cutting-edge antenna that's so good that large chip makers such as Alcatel, Ericsson, Intel, and Nokia are considering having Rangestar integrate it with their silicon, Mr. Van der Meer says. "This could be the Broadcom (Nasdaq: BRCM) of RF," he says.
Bluetooth isn't Rangestar's only bet. It also develops antennas for cordless phones, cellular and PCS phones, and global positioning systems (GPS). "We think Bluetooth is bigger than all of that put together," Mr. Van der Meer says.
Comventures seeded Rangestar about two years ago. Since that time, it and other VCs have put about $10 million into the company. The startup, which is talking to investment banks about an IPO, will close on a $20 million mezzanine round in about a week. Intel is expected to take part in the latest round, a source close to the company says.
ONE IN A BILLION
Technology-focused VCs are generally open to hearing pitches about Bluetooth. "This whole business of the post-PC era and network and consumer appliances is creating a major awareness for wireless communication and things like Bluetooth," says Yogen Dalal, a general partner at the Mayfield Fund.
One particular area that VCs are interested in is home networking. "All homes will have their own local area network, not only for PCs but for all these new devices that are going to be built," Mr. Dalal says. "Most people will not want to plug these things into the wall, and that's where Bluetooth comes in."
While VCs are generally bullish about Bluetooth, they say they aren't interested in it as a general segment. Rather, VCs are looking for startups that have a particular edge. For example, Mr. Van der Meer passed on two Bluetooth chip startups. "They were interesting, but neither one had a unique advantage that set it apart from the rest," he says. "They were $10 million to $50 million companies; I didn't see a $1 billion opportunity." |
