re: SMS, MMS, IM: Handsets, Services, Platforms & "The Beast"
Thwarting the Beast:
The SMS market in particular holds a great deal of promise, as it's proven to be quite popular in Europe and Asia. But widespread use of SMS has, until now, been constrained in the U.S., since the instant-messaging (IM) features of the various carriers weren't compatible. Analysts say that's because Microsoft (MSFT) was bullying carriers into using the software giant's closed-source platform. But recently, four of the six major wireless carriers—only Nextel (NXTL) and Verizon continue to hold out—signed on to an open, compatible IM platform. Other messaging vendors such as Openwave (OPWV), Nokia and Ericsson were apparently set to agree on a common platform, and Nextel and Verizon probably won't be far behind. An industry-wide embrace of open-source IM should effectively thwart Microsoft's plan to divide and conquer—and boost demand for messaging services.
Companies mentioned in this article:
Motorola (MOT), Nokia (NOK), Audiovox (VOXX), Sprint PCS (PCS), AT&T Wireless (AWE), Verizon Wireless (VZ), Nextel (NXTL), Microsoft (MSFT), Openwave (OPWV), Nokia (NOK), Ericsson (ERICY), Handspring (HAND), Research in Motion (RIMM)
>> As The Wireless Telecom Industry Falters, Leaders Hail Next-Generation Handsets And Services
Dave Sterman
Multex Investor
Executives in the wireless-telecom sector can't find much comfort in the recent past. And the present isn't so great either. But there's always the future—and that's what key industry execs and analysts chose to focus on when they gathered in Orlando last month, at the annual Cellular Telecommunications and Internet Association (CTIA) meeting.
Predictably, company officials trumpeted hopes of an industry renaissance, while analysts expressed more muted sentiments.
To be sure, the wireless industry is on the cusp of a major advance in technology. Soon-to-be-released cell phones will be capable of carrying images (MMS) and text conversations (SMS). These fancy features are expected to compel consumers to buy newer, more sophisticated phones. CIBC's Tom Sepenzis has three words for the new line of cell phones: "cool, cool, cool."
That could be good news for Motorola (MOT), Samsung, and Sony (SNE)/Ericsson (ERICY), which have been showing an impressive range of feature-rich models, according to Wells Fargo's Kevin Dede. Overall, the analyst concludes that the new-wave cell phone designs introduced at CTIA should drive higher-than-expected handset sales in the second half of 2002. Surprisingly, he was less sanguine about industry leader Nokia (NOK), whose "offerings again seemed uninspired." Dede thinks that other vendors have done a better job of delivering more features and flexible designs.
Sepenzis suggests investors also check out Audiovox (VOXX), which has come out with a line of phones that could take significant market share in the coming quarters.
Other analysts remain concerned that demand for new handsets that can handle SMS and MMS may fail to materialize. "While development of the technology seems to be on track, end-user demand remains uncertain," says Robert W. Baird's William Power.
Consumer adoption of the new phones has broader implications for wireless service operators such as Sprint PCS (PCS), AT&T Wireless (AWE) and Verizon (VZ). These firms are currently locked in profit-sapping price wars and would greatly benefit from the additional revenue streams that SMS and MMS would provide. "With most mobile messages transmitted using SMS infrastructure, carriers hear 'cha-ching' on each message," says U.S. Bancorp's William Crawford.
The SMS market in particular holds a great deal of promise, as it's proven to be quite popular in Europe and Asia. But widespread use of SMS has, until now, been constrained in the U.S., since the instant-messaging (IM) features of the various carriers weren't compatible. Analysts say that's because Microsoft (MSFT) was bullying carriers into using the software giant's closed-source platform.
But recently, four of the six major wireless carriers—only Nextel (NXTL) and Verizon continue to hold out—signed on to an open, compatible IM platform. Other messaging vendors such as Openwave (OPWV), Nokia and Ericsson were apparently set to agree on a common platform, and Nextel and Verizon probably won't be far behind. An industry-wide embrace of open-source IM should effectively thwart Microsoft's plan to divide and conquer—and boost demand for messaging services.
If wireless IM becomes a big hit with consumers, U.S. Bancorp's Crawford figures that Handspring (HAND) and Research in Motion (RIMM) stand to benefit. Those vendors offer "keyboard-centric" devices that are tailor-made for text.
Despite the IM and new-phone hype, the CTIA show could not camouflage an undercurrent of angst. "Attendees fixated on when the stock market would stop punishing their stocks," notes Prudential Financial's Chris Larsen.
That won't likely happen for at least a quarter or two. That's because these newer, more advanced features won't arrive in meaningful numbers until the third quarter. And even when they do, it's not yet clear that consumers will respond to forecast price points for SMS and MMS services—nor is it certain that they're anxious to spend on new phones. If they balk, then profits in the wireless industry could drift even further into the future.
Dave Sterman is the Director of Research of Chelsea Research and a financial commentator for various news outlets. <<
- Eric - |
