____________(WiFi VS. 3G)_____A comparative analysis
forbes.com
Wi-Fi Buys
Nikhil Hutheesing, 06.08.04, 8:00 AM ET
Wireless service providers are finally launching high-speed third-generation networks after years of delay. 3G lets you use your laptop or cell phone to download and swap big files like games, photographs and even short video clips.
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Good news for e-shutterbugs and game geeks, but is it bad news for Wi-Fi? No telecom topic is more hotly debated. Yet Wi-Fi isn't in danger. As demand for 3G picks up, so will demand for Wi-Fi. Reason: In very dense areas 3G networks slow to a crawl. The cell sites they use are expensive to install, at least $50,000 to $60,000 each. At those prices, a service provider is unlikely to install a new cell site for, say, a hotel to give its guests better service. An airport or convention center might swallow the cost, but the network could quickly get overloaded if thousands of travelers try to access it simultaneously.
That's where Wi-Fi comes in. Wi-Fi is faster than a cable modem and much faster than 3G. It's also cheaper. Wi-Fi access points cost only $1,000 to $1,500 each. Already some hotels and cafes offer free access, absorbing the cost into the price of a room or a cup of coffee (3G users, by contrast, can expect to pay a pretty penny, at least initially). But unlike 3G networks, a Wi-Fi access point requires you to be within 200 feet or so to use it. In an airport, a Wi-Fi network would need to be made up of many access points.
Wi-Fi will get another boost as voice-over-Internet Protocol--an inexpensive way to route phone calls over the Internet--extends to voice-over-Wi-Fi, where cell phone users access Wi-Fi networks to make cheap or even free calls.
In short, Wi-Fi should be in for a gangbuster year. Stamford, Conn.-based Gartner predicts by the end of next year nearly all new laptops will come with Wi-Fi built in. Public Wi-Fi hot spots will increase this year to almost 140,000 worldwide, with some 30 million users. While some service providers also plan to offer Wi-Fi (T-Mobile, for instance, has set up more than 4,500 hot spots), the real winners will be the equipment companies. This year the wireless networking equipment market should bring in revenue of $2.2 billion, compared with $1.8 billion last year.
Investors who want to profit from the growth of Wi-Fi should consider the companies listed in the table. These companies are all expected to have improving earnings per share in 2004 and 2005. They have a healthy cushion of cash on hand and their debt levels are low compared with their total capitalizations. While all of these companies are big in wireless, some, such as Intel (nasdaq: INTC - news - people ), Texas Instruments (nyse: TXN - news - people ) and Cisco Systems (nasdaq: CSCO - news - people ), which last year acquired Linksys, a wireless networking company, are more cautious plays since they are less dependent on their wireless ventures. Purer plays such as Proxim (nasdaq: PROX - news - people ) and Atheros Communications (nasdaq: ATHR - news - people ) are riskier but could stand to benefit more if Wi-Fi really takes off.
Unplugged Players
Company Wireless Business Wireless As
% Of
Total Revenue Est.
2004 EPS Est.
2005 EPS Cash On
Hand
($mil) Long-Term
Debt
($mil) Long-Term
Debt/Total
Capitalization
Agere Systems
(nyse: AGR.A) Integrated circuits for wireless networking 30% $0.04 $0.14 $763 $427.0 41.5
Atheros Communications
(nasdaq: ATHR) Chips, software and system design for wireless networking 100 0.27 0.43 119 0.0 0.0
Broadcom
(nasdaq: BRCM) Integrated circuits for wireless communications equipment 20 1.29 1.48 612 0.0 0.0
Cisco Systems
(nasdaq: CSCO) Wireless networking equipment 8* 0.74 0.86 3,949 0.0 0.0
Conexant Systems
(nasdaq: CNXT) Wireless LAN networking technology 20 0.22 0.34 135 711.8 38.1
IBM
(nyse: IBM) Hot spot infrastructure for service providers 3 4.95 5.52 7,450 16,098 36.4
Intel
(nasdaq: INTC) Wireless networking chips 8* 1.20 1.43 7,539 927.0 2.3
LCC International
(nasdaq: LCCI) Designs and implements wireless networks for service providers 100 0.09 0.27 29 0.0 0.0
Lucent Technologies
(nyse: LU) Develops equipment for data transport over Wi-Fi networks 36 0.11 0.15 3,329 5,366 290.7
NetGear
(nasdaq: NTGR) Networking equipment for homes and small businesses 53 0.64 0.83 77 0.0 0.0
Netopia
(nasdaq: NTPA) Modems, routers and gateways to enable fast access to Wi-Fi networks 15* 0.02 0.34 26 0.0 0.1
Nortel Networks
(nyse: NT) Manufactures equipment for Wi-Fi networks 40 0.16 0.25 3,994 3,755 44.9
Proxim
(nasdaq: PROX) Creates wireless access products for delivery of data and voice 100 -0.10 -0.01 16 0.7 -4.0
RF Micro Devices
(nasdaq: RFMD) Designs and manufactures radio frequency chips and equipment 100 0.27 0.37 221 324.6 35.0
Texas Instruments
(nyse: TXN) Integrated circuits and equipment for Wi-Fi, cellular and Bluetooth 30 1.05 1.38 1,615 394.0 3.1 |
