PHUSF PARTHUS TECHNOLOGIES ORD - UK [UK:PRH] BLUETOOTH PartI
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The digital future is blue
Part I: How investors can profit from Bluetooth
By Vince Heaney , FTMarketWatch
Last Update: 4:04 AM ET Aug 16, 2000
LONDON (FTMW) Last week, the video card on my computer packed up. I spent hours groveling under the desk in a tangle of cables. That got me interested in Bluetooth.
Named after a 10th century Viking king who unified Denmark and Norway, Bluetooth is a new technology. It uses short-range radio links to replace the cables connecting portable and fixed electronic devices. Unlike infra-red connections, Bluetooth doesn’t rely on two devices being in sight of one another.
The market for Bluetooth products could be a vast market. Ericsson LM of Sweden (ERICY) developed the idea in 1994 and now is one of 2,000 members in the Bluetooth Special Interest Group. Ericcson owns the Bluetooth trademark.
Technology experts figure Bluetooth technology will become part of 100 million or more mobile devices by the year 2002.
The Bluetooth group, formed in 1998, includes all the computing and wireless industry heavyweights – like Intel (INTC) , Microsoft (MSFT) , Motorola (MOT) and Nokia (NOK) .
Nice idea but how to I make money from it?
As a concept, Bluetooth has been around for a while. Intel and other companies, for example, sell wireless networking devices for the home and office. But Bluetooth’s first products are rolled out this autumn. Ericsson will launch a wireless headset next month and a built-in Bluetooth phone by the end of the year.
As Bluetooth’s members put it, the technology will enable users to connect a wide range of computing and telecommunications devices “easily and simply, without the need to buy, carry, or connect cables. It delivers opportunities for rapid ad hoc connections, and the possibility of automatic, unconscious, connections between devices.”
As an individual investor, how do you know you have backed the right version of a new Bluetooth product? It’s the VHS/Betamax dilemma. Cooperation among manufacturers can help reduce this compatibility problem – called interoperability in industry jargon.
Alternatively, don’t try and figure out who has the best application but focus on the companies making the nuts and bolts. Or in this case the silicon chips.
UK semi-conductor manufacturer ARM Holdings (UK:ARM) (ARMHY) is worth a look. ARM designs high-performance chips, then licenses the intellectual property to chip manufacturers and electronics companies. Ericsson has licensed ARM microprocessor cores for use in Bluetooth products.
Bearing ARMs
ARM’s quarterly results, which came out last month, beat expectations. See story.
Revenue grew 60 percent year-on-year to 23.1 million pounds. Royalty revenues grew by 111 percent year-on-year and earnings per share came in at 0.65 pence vs. an expected 0.5 pence. In line with many tech stocks, the London-traded share price is well off its March highs of 1,005 pence and currently trades at 665 pence.
When new technology is aimed at mass-consumer applications I’s vital to keep the product cost low.
Cambridge Silicon Radio claims to be nine months ahead of the market in developing a single-chip Bluetooth solution. Single means the digital code, radio frequency receiver and the processor are all on one chip, unlike some competitors’ multi-chip options. Costs are held down -- the current chip costs $8, with potential to fall to $5. CSR raised 6 million pounds in venture capital last April and is currently in a private placement round. The next step will be to float the company. Watch out for this IPO, probably in London or on one of Europe’s high-growth stock markets.
Follow Parthus
Taking the single chip philosophy one step further is Parthus Technologies (UK:PRH) , which listed on the London Stock Exchange in May. PRH follows a “zero-chip” strategy. Like ARM it sells the intellectual property of designs for a licence and PRH design-chip architecture that can be integrated onto existing chips. “By Q1 2001 our zero chip strategy will enable Bluetooth applications for $1”, Barry Nolan, vice president of marketing, said recently.
He pointed out that putting the new architecture onto existing chips adds very little to the cost of the chip, doesn’t use a lot of power and overcomes the capacity constraints that have dogged the semiconductor industry this year. Nolan sees “huge demand” for Bluetooth applications, and Parthus have been active in signing new licence agreements. PRH shares traded recently at 182p.
Looks like we can start calling the radio “the wireless” again.
Later this week: Part II – Fund manager Anthony Gambacorta’s view of Bluetooth
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