Sierra Wireless undeterred by expanding number of municipal Wi-Fi networks

In cities across North America surfing the web and connecting to your data is becoming easier; both in terms of access, and on your pocketbook. By the end of 2006, more than 300 municipal Wi-Fi networks were either deployed, in various stages of deployment or were being planned in the US alone.For companies like Richmond BC-based Sierra Wireless Inc. widespread adoption of municipal Wi-Fi networks could spell trouble as wider access to public wireless broadband networks eats into opportunities for its competing wide area wireless cards. The publicly traded company generates most of its revenue from two divisions: AirCard PC card series and embedded modules. The PC cards enable users to connect to the internet on their laptops, using the cell phone carriers' networks. Sierra's PC cards accounted for 71% of their 2006 revenue, or $156.6 million. Greg Speakman, Sierra's vice-president, adapter marketing, concedes that municipal Wi-Fi will affect their business. But to what extent is unknown, he adds. "Municipal Wi-Fi is generally in urban areas. It may exist where your office is, and not where your home is," he explains. According to Speakman, one of the principle strengths of Sierra Wireless' PC cards is their nearly ubiquitous coverage. "Our customers are power users. They're people on the road, people that need to use it to do their jobs, working everyday. People that need to be connected to their office and their data- whether they're at home, downtown, in Markham ON or St. John's NL."Data packages remain comparatively high-priced, but connectivity - essentially anywhere a cellular network has coverage - is an invaluable feature, according to Speakman. "It's a little bit different if you're someone who is strictly in Toronto, who has access to the Toronto municipal network and that's the only one you need."Sierra Wireless has weathered its share of competition before. Starbucks, and now many other independent coffee houses, offer low-cost or free Wi-Fi to their customers. Low-cost Asian manufacturers are increasingly entering the market, as well. In addition potential multinational partnerships, such as the now defunct Nokia/Intel high speed downlink packet access (HSDPA) module plan, threatened to saturate, and potentially dominate, the market.By staying ahead of, and actually innovating, technological advances, Speakman believes Sierra Wireless will be able to withstand the challenges that lie ahead. The BC-based firm aims to capture more market share by, among other things, being the first to market with their products. "Months, quarters or years after we come out with the new technology, are able to provide the technology at a lower cost to the carrier. By that time, we've certainly established ourselves with our carriers with our carriers' customers. I think that's been very successful for us," he says. It seems to be working. Amid much applause, Sierra Wireless demonstrated its recently launched PC card and embedded modules for HSDPA networks at the 2007 3GSM World Congress. Sierra Wireless' embedded module business is gaining traction as well, due in large part due to having both CDMA and GSM technologies. A long list of partners including Lenova, Hewlett-Packard and Panasonic also play a significant role in this business. In 2005, the company's embedded modules represented only 13% of revenue, but by 2006, this division was responsible for 24%and $51.9 million in revenues. Opportunities abroad are also opening up for Sierra Wireless. In 2005, the European and Asia-Pacific region accounted for 31% of revenue - in 2006 these two regions represented 36%. In mid February, the company announced plans to expand their European operations to support this increased penetration. Municipal Wi-Fi networks may actually help Sierra Wireless in the long run, contends Speakman. "We find that Wi-Fi in general has heightened the awareness of wireless data, and what mobility and wireless data can do," he says. "People get to understand what's available and they see the limitations of Wi-Fi. Then, they understand the number of things that a cellular provider can provide around these limitations. The awareness has in fact, helped our sales and our growth over the years."

Sierra Wireless undeterred by expanding number of municipal Wi-Fi networks

News | March 26, 2007

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