|
|
ONLINE FEATURES
Book Reviews
BW Video
Columnists
Interactive Gallery
Newsletters
Past Covers
Philanthropy
Podcasts
Special Reports
BLOGS
Auto Beat
Bangalore Tigers
Blogspotting
Brand New Day
Byte of the Apple
Economics Unbound
Eye on Asia
Fine On Media
Green Biz
Hot Property
Investing Insights
Management IQ
NEXT: Innovation
NussbaumOnDesign
Tech Beat
Working Parents
TECHNOLOGY
J.D. Power Ratings
Product Reviews
Tech Stats
Wildstrom: Tech Maven
AUTOS
Home Page
Auto Reviews
Classic Cars
Car Care & Safety
Hybrids
INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | |
MAY 22, 2003
Is a Wi-Fi Bubble Building? As one of tech's few growth areas, it's luring startups and VC cash -- in a familiar pattern. First to feel a pop may be consumer outfits A year ago, Sean Marzola was the CEO of one of Silicon Valley's hottest Wi-Fi startups. Embedded Wireless Devices in Pleasanton, Calif., had set out to design chips for Wi-Fi (wireless fidelity) access points -- "hot spots" -- that permit wireless Internet access within a radius of 300 feet. But about 18 weeks before EWD's first product could start being manufactured, investors pulled the plug. Last August, EWD quietly closed its doors, leaving Marzola an entrepreneur without a home. EWD's story could soon become more commonplace. Wi-Fi is the increasingly popular technology that lets anyone with a laptop and a wireless card surf the Web from home or work, in airports or cafés. In 2002, according to Allied Business Intelligence in Oyster Bay, N.Y., worldwide sales of Wi-Fi equipment soared by 25%, to $1.25 billion -- an anomaly in the current economy. This year, ABI expects orders for such gear to jump 33%, to $1.67 billion. Wowed by such projections, venture capitalists poured more than $2 billion into various Wi-Fi outfits in 2002, according to one major venture firm. THE NEW NEW THING. Wi-Fi may be the hottest tech market to come along since the Web itself. And while that's cheery news, it's also raising red flags in some quarters -- a concern that just as the Web spawned excess investment based on careless projections of future demand, the same thing could be starting to happen in Wi-Fi. True, this market remains far from saturated. And most major advances in technology initially attract more players than the market can ultimately sustain, leading to a shakeout at some point. Yet more and more analysts worry that euphoria over the one segment that has shown some life during the most prolonged tech downturn in recent memory could lead to overexpansion and an imbalance of supply vs. demand -- creating the type of capacity surplus that has shattered the telecom-equipment business over the past three years. One of the biggest worriers is Andrew Cole, an analyst with wireless consultancy Adventis in Boston. "Wi-Fi is overrated and headed for a fall," he declares. The situation isn't that simple. Wi-Fi is really two markets -- one consumer, the other corporate. And at the moment, they seem to be headed for divergent paths -- one difficult, the other more promising. WHITHER USAGE? In consumer Wi-Fi, the question of the moment is: How strong will demand be? The number of hot spots available to the public worldwide should grow from 12,235 in 2002 to 145,417 in 2007, predicts market consultancy Cahners In-Stat. But whether their usage will grow nearly that fast isn't certain. Analysts say wireless service provider T-Mobile, which operates 2,300 hot spots in the U.S., recently lowered its Wi-Fi access prices from 25 cents to 10 cents a minute because demand is turning out to be only a quarter of what it expected. (T-Mobile hasn't returned repeated calls seeking comment.) Demand could be squishy partly because, like the Web itself, the Wi-Fi consumer market started life as a movement of geeks who sponged off any node within 100 yards. So from the start, a big challenge for any Wi-Fi service provider has been to convert such freeloaders to paying customers in densely populated areas where no-charge nodes are numerous. Those that can't end up folding -- like a New York company called Joltage did last February. Another growth deterrent is that Wi-Fi isn't easy for an average person to use. It requires setting up an antenna, reconfiguring a computer, and signing up for broadband service. And that doesn't count trying to use Wi-Fi on the road. Jeff Belk, senior vice-president for marketing at Qualcomm (QCOM ), which makes chips for cell phones, likes to tell of how he recently picked a small hotel in London because it had a Wi-Fi network. It turned out that the employees couldn't explain how to get onto the network, and he would have had to download special software to log on -- and then uninstall it afterward to avoid corrupting his files.
  | | |
 Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Policy |
Printer-Friendly Version
