Posted on Mon, Nov. 10, 2003
Mobile power: Valley could still have key wireless role
By Dean Takahashi
Mercury News
The conventional wisdom is that Silicon Valley missed the boat on wireless.
None of the big wireless carriers is based here. Europe and Asia are rolling out cell phone innovations at a much faster rate. Ecosystems of wireless companies have grown up in Scandinavia, thanks to the success of cell-phone giants Nokia and Ericsson. Dallas has Texas Instruments, the biggest maker of chips for cell phones. San Diego boasts wireless chip maker Qualcomm.
But while the valley hasn't yet had a blockbuster wireless success, it could make some important contributions to the wireless future. So much venture capital has poured into wireless companies here that observers believe that the region is poised to be a player in a wide range of wireless technologies.
» Next-generation tech: Individuals first
» Camera cell phones are clicking
» Real estate riding wave to wireless future
» GPS system lets employers track field force
» WiFi helps make paging the doctor easier
» Experts: Wireless network risk overhyped
» A novel approach to talking to strangers
» WiFi start-ups face formidable challenge
» New phones help those on the go
» Home wireless network becoming easier, cheaper even for novices
» Heading down to Starbucks for another day at the office
» VCs fund wireless start-ups with caution
» Most-popular devices aren't the latest
» Free WiFi in Silicon Valley
Gerry Purdy, an analyst at Mobile Trax in Cupertino and a partner at Diamondhead Ventures, says that wireless is just in the first inning of the baseball game in terms of its growth. One way of judging its progress is by venture activity. In the third quarter, wireless start-ups commanded about 9 percent of the venture capital raised by Silicon Valley start-ups, up from 3 percent a year earlier, according to the MoneyTree Survey, a quarterly venture capital study by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association.
``People used to ask why on Earth would Silicon Valley have much to contribute to wireless,'' said Jean-Marc Frangos, who offers an outsider's perspective of the valley as chief technology officer of British Telecom's BT Group. ``But the valley is a hot place to be for wireless. The nuclear winter of the downturn is behind us. There are plenty of deals happening.''
Frangos thinks the valley will do well in technologies that combine different networks, offering conveniences like the ability to check e-mail, voice mail and pages on one device. He points to companies like Kineto Wireless, a start-up in Milpitas that takes a call initiated on a cell phone and completes it more inexpensively by sending it out over the Internet on a phone line.
``Wireless will be a critical next wave for the valley,'' said Lucian Hughes, associate partner at Accenture's research lab in Palo Alto, which is looking into ways to put radio sensors in just about everything. ``Wireless is our way to take the Internet to the real world, like delivery truck drivers or sensors that detect leaks on oil pipelines.''
Pulling in the dough
The numbers back up such assertions: 408 wireless companies have raised $3.5 billion in the past three years in the United States, according to the MoneyTree Survey. Of those, 124 wireless firms in Silicon Valley raised $1.1 billion. And within the valley, the wireless sector ranks No. 3 in money raised, behind only software and networking.
Those numbers don't take into account the fact that major companies like Hewlett-Packard, Intel and Cisco Systems are all steering a major part of their research and development into wireless projects, said Rajeev Chand, an analyst for investment bank Rutberg & Co. in San Francisco.
``We believe there's an uptick in wireless venture funding,'' he said. ``And contrary to popular opinion, the valley has a lot of experienced entrepreneurs, venture capitalists and investors in this area.''
In some sense, the valley's competence in wireless is masked by its prowess in so many other areas. Tim Bajarin, analyst at Creative Strategies International in Campbell, says wireless will be big, but it may wind up being just one engine of growth, alongside industries like nanotechnology and biotech.
Wireless has seeped into mainstream consciousness in the valley because real products are finally coming out that fulfill the promise of wireless networking, says Satjiv Chahill, chairman of Mobile Digital Media in Mountain View. From wireless Internet zones at Starbucks to the Treo 600 handheld cell phone that also functions as a personal digital assistant, ``you can see it happening for real,'' he says.
Consumer interest rising
Although the United States has been behind Europe and Asia in adopting wireless innovations, now U.S. customers are flocking to such new products as camera cell phones. And they are poised for ``number portability'' come Nov. 24, when customers will be able to take their phone numbers with them when they switch wireless carriers.
``You're beginning to see the technology reach into all sectors of society,'' Chahill said.
The presence of wireless in the valley is becoming palpable. Consider Firetide, a Honolulu-based company with operations in Los Gatos. The company makes a little box with two antennas called a wireless mesh router that is used to quickly set up wireless fidelity, or WiFi, networks.
Firetide recently installed a bunch of these boxes in the Opera House banquet hall in Los Gatos, a 99-year-old, historic brick building that can't be easily rewired. The Firetide box is attached to a wired network at the bottom of the building and extends its reach wirelessly to the upper floors, where conventional WiFi nodes are deployed so that the Opera House's guests can use their laptops in the banquet hall. In addition, a box on the roof of the building will beam signals down to Town Square Park so that anyone can log onto the Internet while sitting on a park bench.
For a long time, wireless companies suffered from the venture capital drought, brought on by the collapse of the Internet bubble and wireless' overhyped third-generation networks, in which carriers spent billions on licenses for wireless spectrum, only to run into long delays in deploying data services.
Ike Nassi, chief technology officer at Firetide, expressed amazement when he described how his company had an easier time raising money in Honolulu in 2002 than it did in Silicon Valley. Now it appears to be much easier to raise money here.
Money is shifting
The types of companies being funded are also changing. Early on, WiFi chip start-ups drew hordes of venture capital, but now the field is thinning out to a few winners like Atheros Communications.
The investment seems to be shifting to content providers like wireless gaming and ring-tone companies. Enterprise mobile applications, video processing and photo messaging are also hot areas, said analyst Chand.
Veterans of other Silicon Valley industries are also flocking to wireless start-ups. For instance, in the wireless games industry, Greg Ballard, former chief executive of SonicBlue and 3Dfx, joined Sorrent in San Mateo as CEO. Trip Hawkins, founder of Electronic Arts and 3DO, just started a wireless gaming company called Digital Chocolate.
Dale Ford, a wireless analyst at iSuppli in El Segundo, fears that a herd mentality is developing that could lead to overhyping of wireless.
``I would hope investors and companies will recognize that wireless is a niche opportunity for players in the valley,'' he said. ``Companies like Apple and Intel were at the heart of new industries before. But the valley may be on the edge of wireless because there are so many competitors in the rest of the world.''
--------------------------------------------------------------------------------
Contact Dean Takahashi at dtakahashi@mercurynews.com or (408) 920-5739.
siliconvalley.com
[Harry: What this article does not mention is that the margins in wireless are just terrible. I heard one venture capitalist mention he was only able to license his product at 8 cent per installation. There was no way for the start up to make back its money in a reasonable amount of time.] |
