re: Wireless Modems from Sierra Wireless & Novatel Wireless
>> Getting A Peek At Payoff
Margo Mccall
June 21, 2002
Wireless Week
For wireless companies, perhaps nothing is so sweet as a technological risk about to pay off.
PC card makers took a gamble when they began developing next-gen cards, but now they finally could hit the jackpot.
Back when Sierra Wireless and Novatel Wireless began developing GPRS and CDMA 1XRTT cards for laptops and handhelds, they had few assurances about when carriers would roll out the necessary next-generation networks. Both companies long had been providing embedded modules and network cards running on the cellular digital packet data standard, which provides speeds of about 19 kilobits per second. And both already had taken one other big riskādeveloping proprietary cards for Metricom Inc.'s 128-kbps Ricochet data serviceāonly to end up writing off millions when the company went bankrupt.
This time the companies are keeping their fingers crossed that the payoff will be genuine. And so far, it looks like it is. As carriers prepare to launch their GPRS and 1XRTT networks, contracts with both operators and device makers are starting to pour in. Novatel has signed up AT&T Wireless, Sprint PCS and VoiceStream Wireless Corp. in this country, as well as Britain's mmO2, Canada's Microcell PCS and device-makers Compaq Computer Corp.āwhich recently merged with Hewlett-Packard Co.āDell Computer Corp. Sierra Wireless includes Verizon Wireless, Sprint PCS, AT&T Wireless, Telus Mobility, Bell Mobility, Rogers AT&T Wireless, Casio Inc. and Toshiba Corp. among its customers.
Sierra's AirCard product line now includes the 555, a dual-band 1X card; the 550, a single-band 1X card; and the 750, a tri-band GSM/GPRS card. The 710 single-band GSM/GPRS card will be available soon.
Novatel has added the G201, a dual-band GSM/GPRS card, and the C201 1X card to its Merlin product line. It also has designed an iStream card for VoiceStream.
Both companies currently are beefing up their distribution networks to handle volume sales and waiting for more carriers to launch next-generation networks.
'We're seeing some really encouraging early signs,' says Jason Cohenour, Sierra's senior vice president of worldwide sales and marketing. 'We've just invested tens of millions in 1X and GPRS. We're going to try to sell as many of these as we possibly can.'
Cautious Optimism
Perhaps wary from the Ricochet experience, Cohenour cautions that Sierra isn't ready to declare the new products an unmitigated success yet. The company still has to manage distribution, making sure excess inventory doesn't get caught up in the channels. Problems have cropped up in AT&T Wireless' contract for the 710. And then there's the matter of end-user uptake. 'You have to manage your enthusiasm,' he says.
Peter Leparulo, senior vice president of CDMA products at Novatel, foresees enterprise customers as the early adopters, due to the swift return on investment promised by productivity gains from giving mobile workers wireless access. 'Once they see it, you get a big 'Aha!' People love it. The productivity element is very easy to demonstrate.' Novatel has 20 agreements in place and is testing with more than 30 carriers. Still, there is the matter of putting a distribution network in place, as well as coming up with the best ways to sell wireless data.
John Bucher, a wireless data analyst with Gerard Klauer Mattison, shares the same sense of guarded optimism. Such caution isn't surprising, given wireless data's many fits and starts. First off, in order for GPRS and 1X cards to begin selling, carriers need to begin promoting wireless data. Some sort of gestation period can be expected, Bucher says, as carriers get networks honed and marketing materials ready. As well as that, customers need to begin adjusting to the idea that wireless data doesn't only mean a handset, but a handheld or laptop computer, too. Tellingly, educating consumers about features and functionality is a crucial part of Novatel's 1X card agreement with Sprint PCS.
Bucher seconds Leparulo's concern about devising the best ways to sell the next-generation cards. While carriers are central, systems integrators and value-added resellers are part of the equation, too. That will be especially true if enterprise customers turn out to be the largest users. 'Most IT buyers are not going to walk into Best Buy and buy a hundred PC cards. They'll rely on either in-house expertise or systems integrators,' he says.
Almost one-third of Sierra's business goes through carriers and nearly half through resellers and distributors. The remainder goes through OEMs. And Novatel has included wholesaler Ingram Micro in its rash of distribution agreements.
While initial order fills will boost a first wave of sales, more telling, says Bucher, is what will happen when those orders are replenished. 'That's when we'll start to see a base of demand,' he predicts.
Other Strategies
Sierra and Novatel aren't alone, however, in trying to supply the connection devices that will let mobile users swiftly check e-mail and surf the Internet on their laptops or PDAs. Gtran Wireless, based in Westlake Village, Calif., claims the first-to-market title for a 1X card with its July 2001 launch with Korea Telecom. The company has since deployed its DotSurfer 1X with Monet Mobile Networks in the United States, Centennial Communications in Puerto Rico and six network operators in Latin American. The privately held Gtran currently is testing 1X EV-DO with SK Telecom in Korea. Furthermore, the company is working on combining CDMA and 802.11b into a single card.
Wavecom Inc., a 10-year-old French company with U.S. operations, is moving in on the embedded front. It already has an embedded GPRS module in production and is testing a 1X version. Wavecom only started working with CDMA after it acquired U.S.-based Icann Wireless last November. Hany Neoman, Wavecom's COO for the Americas, says modules are much better for high volumes. Besides being one-third to one-half the price of PC cards, embedded modules have lower technical support requirements. The company over the years has sold millions of embedded modules to handset manufacturers and views OEM suppliers such as Texas Instruments Inc. and Qualcomm as its competitors.
From CDPD To Next-Gen
Sierra Wireless, established nine years ago with initial funding from the former Sierra Semiconductor, has been targeting the mobile professional for some time. Its clunky Pocket Plus CDPD product, developed in the late '90s for laptops, was ahead of its time. But Sierra's rugged MP200 vehicle-based modemsāMP stands for Mobility Plusāwere a hit among utility and public safety customers. Sierra sold tens of thousands of MP modems but realized that the business, though steady, wouldn't be growing by leaps and bounds.
In 1997, Sierra released its first AirCard, moving beyond the Pocket Plus' 'tethered brick' form factor to a streamlined PC card. The 510, Sierra's first CDMA card, was launched in late 2000. Commercial shipments of the 555, Sierra's first 1X card, started in March. The 750 represents the company's eighth AirCard. 'Each one definitely represents an engineering challenge. We get a little better at it every time,' Cohenour says.
Although CDPD has provided a solid revenue base, that is changing as customers understandably line up to take advantage of the new technologies. Sierra targeted 1X first, hoping to capitalize on its strong customer base in North America, where CDMA is more popular. Offering GPRS enables the company to expand into other geographical areas. 'We've gone very quickly from a 2G company focused primarily on North America to a 2.5G and 3G company with a global focus,' Cohenour says.
Novatel got its start in the early '80s, when it bought an Alberta, Canada, wireless data group. 'There were a lot of naysayers,' Leparulo recalls. 'They were going to be absolutely right about the vision or they were going to be absolutely wrong.'
The company developed an initial PC card that was 'painfully slow,' then went on to create a CDPD modem for early Palms, which was a fairly complicated undertaking. Then along came Ricochet. Despite the fact that Novatel ended up writing off $26 million when Metricom went belly up, Leparulo says Ricochet was a tremendous learning experience. 'That's where we learned everything,' he says. 'What came out of that was if you had the speed, if service plans were palatable to customers, it would take off.'
Small companies such as Vancouver, Canada-based Sierra and San Diego-based Novatel can try to mute their risks by encouraging carriers to make volume commitments. But in the end, Leparulo says, 'you really can't assuage that risk. If the risk is in front of you, you can run with the big dogs or you can sit on the porch and bark about it.'
Cohenour agrees. 'You have to make bets pretty early on. You have to put the telescope up to your eye and see what the market's going to look like,' he says. 'You can secure upfront supply agreements, but that doesn't mitigate the risk entirely.'
And hopefully for the two companies, the payoff won't be entirely mitigated either. <<
- Eric - |
