Seeking Greenbacks In Bluetooth
By Ken Schachter, TechWeb Finance Jul 10, 2000 techweb.com
Class, it's time for a Bluetooth pop quiz. 1. Bluetooth is: (a) The name of an ancient Norse king. (b) The name of a hot new wireless technology developed in Sweden. (c) A leading cause of gum disease. (d) A new brand of bubble gum.
2. Investors should: (a) Buy any company that makes a Bluetooth product. (b) Run like the wind when they hear Bluetooth hype. (c) Think of Bluetooth as an investment theme whose payoff would be several years down the road. (d) Put all their money in pork-belly futures.
If you answered (b) in question No. 1 and (c) in question No. 2, you are well on your way toward grappling with a new technology whose investment potential remains unclear.
Bluetooth, of course, is the new open standard originated by Ericsson (stock: ERICY) that creates a wireless network for devices within about 30 feet of each other by utilizing the 2.4 gHz frequency.
For those of you who answered (a) to the first question, the technology was named after Viking King Harald Bluetooth, the son of Gorm.
In the Bluetooth future, appliances will be holding their own little gabfest.
A nearby Coke machine might beckon you through your cell phone. If you're thirsty, your cell phone could pick up the tab. Public areas like hotel lobbies could offer wireless Internet connections. Phones will talk to refrigerators, coffeemakers will talk to PCs, PDAs will talk to ink-jet printers, and on and on.
Yusuf Haque, communications analyst at 123jump.com, cautions that while Bluetooth technology is versatile, it carries some risks.
Perhaps paramount is that the market is entirely untested.
"There is currently no consumer demand," he noted. Corporations, with their big technology budgets, could be the initial adopters.
Further, a Bluetooth-enabled cellular phone, for instance, could be awfully lonesome until it gets other Bluetooth devices to talk to.
"It will be years before consumers replace appliances with Bluetooth TVs and microwaves," he said.
Another note of caution comes from a Dataquest study. The study questions whether Bluetooth's security features will be properly implemented.
"Treat Bluetooth as unsecured in critical applications," the report warns, and suggests that manufacturers add additional encryption when required.
Still, a veritable technology all-star team has assembled to support Bluetooth. Nokia (stock: NOK), Ericsson and Motorola (stock: MOT) have announced Bluetooth cell phones. IBM (stock: IBM) and Toshiba have announced Bluetooth laptops. Intel (stock: INTC) and Toshiba have announced Bluetooth LAN access.
So where are the investment possibilities?
A Merrill Lynch research note suggests that Bluetooth will be a significant driver in the semiconductor market, accounting for $4.3 billion by 2005.
By then Merrill analysts see Bluetooth chips in 90 percent of PDAs, 70 percent of PC motherboards, 90 percent of notebooks, 50 percent of printers, 60 percent of digital cameras, and 20 percent of cars.
A slew of companies will be rolling out Bluetooth silicon.
Ericsson, as the originator of the technology, may get some benefit from a "halo" effect, much as Java's success has helped Sun Microsystems SUNW.
"Ericsson has the potential to dominate the mobile phone infrastructure markets," Haque said. But he warned that Ericsson, which carries a heady price-to-earnings ratio of 94, is "a very volatile stock" and belongs in the portfolios only of aggressive-growth investors.
Other early movers, according to the Merrill Lynch report, are Motorola and National Semiconductor (stock: NSM).
Merrill analysts also cite Broadcom (stock: BRCM), Lucent (stock: LU), Philips (stock: PHG), and Qualcomm (stock: QCOM) as potential contenders.
From an investing angle, however, it may be a little too early to place bets on Bluetooth.
In 2000 and 2001, the Merrill report concludes, the Bluetooth market will be insignificant for the major players.
So for now, investors may have bide their time while keeping one eye peeled on the wireless wizardry named after old King Harald.
Jim |
