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Technology Stocks : Netro Corp - (NTRO) -- Ignore unavailable to you. Want to Upgrade?

To: Secret_Agent_Man who wrote (412)	10/10/1999 8:53:00 PM
From: Secret_Agent_Man	Respond to of 792

Netro is an early leader in the emerging broadband wireless access market. The company's AirStar product is currently being trialled by approximately 25 operators around the world, and the company is pursuing opportunities with several new customers. With an innovative product, strong partners, and a solid management team, Netro is well positioned to benefit from a market that we expect will exceed $3 billion in four years. Outlook Netro is a technology leader and pioneer in the broadband wireless access equipment market. The company has integrated Time Division Multiple Access (TDMA), Asynchronous Transfer Mode (ATM) and Quadrature Amplitude Modulation (QAM) into a single product. The combination of these three technologies allows service operators to offer high speed integrated voice and data services to business users on a cost-effective basis. n Market Opportunity The target customers for Netro are a new breed of service operator, sometimes referred to as wireless CLECs (Competitive Local Exchange Carriers). These operators will use AirStar to offer service to business users with the following characteristics: · Broadband – high speed, nominally 1.5 million bits per second (Mbps), which is about 24-times faster than the current fastest analog modem technology, and comparable to existing DSL (Digital Subscriber Line) and cable modem technologies. AirStar also offers the unique capability of allowing users to send data in bursts up to 16 Mbps. These speeds are more typical of a business user than a residential user; · Access – defines the connection between the end user (where a terminal with an average selling price of about $5,000 is required) and the network (where a hub that ranges between $50,000 and $150,000 is needed). Access is widely perceived to be the next bottleneck in delivering higher speeds for communications. Currently, the access market represents more than $8 billion a year in annual equipment sales; · Wireless – refers to over-the-air, terrestrial based, radio technology. Competing technologies are cable, copper wire, fiber or satellite. However, because of the extensive construction usually associated with copper and fiber-based systems, the time to install one of these systems can be long. Wireless has been viewed as a way to reduce the time-to-deploy. One issue that has historically limited the growth in this market is the licensing requirements that are generally associated with radio technology. However, licenses to operate broadband wireless networks have been recently awarded in several countries in South America and Europe. It is for this reason that the first versions of AirStar were designed to operate at 10 GHz and 26 GHz, the two most common frequencies licensed in South America and Europe, respectively. In fact, international markets now represent nearly all of Netro's revenues. One of four international customers (NTL in the UK, Airtel in Spain, Techtel in Argentina and Comsat in Peru) is likely to be the first to offer a broad range of services using AirStar. (i.e., full network rollout). In the U.S., wireless service is expected to be offered in several frequency bands, including the MMDS (Multichannel Multipoint Distribution Service) frequency range. To obtain 200 MHz of spectrum in the 2.5 GHz MMDS band, an operator would need to use the Multichannel Distribution Service (MDS) and Instructional Fixed Television Service (IFTS) channels. An MMDS license alone can contain up to 100 MHz of bandwidth. The Federal Communication Commission (FCC) has licensed more bandwidth at higher frequencies. LMDS (Local Multipoint Distribution Service), for example, contains a 150 MHz and a 1.15 GHz channel transmitted at a frequency of 28 GHz. Other operators own large chunks of spectrum at higher frequencies including WinStar (operating in the 38.6-40 GHz frequency band), Advanced Radio Telecom (38 GHz), AT&T (through its acquisition of Teleport/Biztel received a license at 38 GHz) and NextLink (28 GHz). Because a larger amount of frequency bandwidth was made available, higher speed communications is possible. It is for this reason that we believe that Netro's product has begun to target customers with a broad spectrum license. In fact, Netro just recently shipped its first 38 GHz product to a U.S. customer for test, and will have a 28 GHz product by the end of 1999. Over time, the U.S. market could represent 25% of sales. n Partners Netro has both direct and indirect sales efforts. Indirect sales account for about 80% of the company's revenues. The majority of the indirect sales are through two partners: Lucent and Siemens. Netro is the Original Equipment Manufacturer (OEM) for Lucent's OnDemand Access and Siemens' SRA MP products. Lucent has been responsible for bringing in customers such as Airtel, Techtel, Comsat, and BroadNet in Germany, while Siemens has delivered Retevision in Spain, Sunrise in Switzerland and OTE in Greece. While neither relationship is exclusive, we think the technical superiority of AirStar gives Netro a substantial competitive advantage that Lucent and Siemens will prove difficult to find elsewhere. Also, the partnership between these companies goes beyond just an OEM relationship. Lucent and Siemens both currently own about 2% of Netro, and Lucent helped jointly develop the 38 GHz version of AirStar.