BW ONLINE DAILY BRIEFING

STREET WISE by Amey Stone	February 11, 1999

GOOD DEAL FOR MOTOROLA. Ultimately, the technology landscape could shift as companies that are jockeying for position now become the new leaders. Consider how dramatic the changes will be if Motorolas vision is realized: When announcing the Cisco deal, Bo Hedfors, president of Motorola's Network Solutions Sector, said there are currently 800 million conventional wireline customers, 200 million wireless customers, and 200 million Internet users worldwide. By 2005 he predicts that there will be 1 billion wireline, 1 billion wireless, and 1 billion Internet users around the globe.

"With any kind of paradigm shift, where new technology is introduced, it offers the opportunity for a different set of leaders to emerge," says Megan Graham-Hackett, an analyst at Standard & Poor's equity group. Still, she says the payoff is too far out to yet factor into her ratings or earnings estimates. Cisco, Motorola, Nextel, Microsoft, and British Telecom all rose the day of the announcements. But a punishing day for technology stocks on Feb. 9 eradicated those gains.

The move by recent laggard Motorola to partner with networking leader Cisco did impress some analysts. That deal could give Motorola a leg up when the Internet goes wireless, since it already has experience producing a range of wireless devices, says Chris Chaney, an analyst with A.G. Edwards & Sons. Merrill Lynch analyst Michael E. Ching upgraded Motorola from neutral to accumulate on Feb. 9, writing in a report that the alliance with Cisco "substantially improves the company's position in both next-generation wireless networks and wireless access to the Internet." He thinks the deal will improve Motorola's revenue growth by next year.

Cell-phone handset makers will be obvious beneficiaries as wireless phones became more useful for jobs other than making calls. But Wall Street is currently more worried about increasing price competition as more handset makers enter the market. "It is [becoming] a lot more competitive, but there is still a lot of opportunity," says Chaney.

NET PALM PILOTS? The opportunities probably won't be realized until the handsets get a lot better. The current generation of so-called smart phones is too bulky and expensive ($700 for top models) to be of much interest to anyone but technofiles, says Zia Daniell Wigder, an analyst in Jupiter Communications' bandwidth and access strategies practice. Internet access is painfully slow, and battery life is short. "They are really preparing products for use 18 months to three years from now," says Matt Hoffman, a senior analyst with Dataquest. "They are laying the groundwork for the market that is emerging."

Makers of mobile handheld devices should also enjoy sales gains once they can easily connect to the Net. 3Com (COMS), maker of the Palm Pilot, now has 41% of that exploding market. Shipments of these devices grew to 3.9 million units in 1998, up 61% from 1997, according to Dataquest, a unit of the Gartner Group. "It will increase Internet usage as well if you can just flip out your Palm Pilot and hop on the Internet rather than being at your desktop," says Ryan Jacob, manager of the Internet Fund.

Companies that make equipment for the wireless networks should also benefit. Graham-Hackett says the Motorola deal did factor into her assessment of Cisco, which she rates strong buy. "It speaks to their dominant presence within the networking industry as well as their strong management team," she adds. And it is just one among the many alliances Cisco has formed to fund research and development in Internet-related technologies.

Some semiconductor makers could also win big by providing the chips that will go into wireless equipment. Chaney believes that Texas Instruments (INTC), could also win, since it is working on the smart, fast, power-efficient chips that will go into smart phones.

The deals announced on Feb. 8 may not be the ones that, in the end, deliver the promise of a wireless Internet. But they prove that the technology is on its way. It's too soon to pick the winners. But fortunes will be made by investors who start reading the tea leaves now.

Stone is an associate editor at Business Week Online

EDITED BY DOUGLAS HARBRECHT _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

BACK TO TOP