Sierra Wireless sits down with Report on Wireless

Since the advent of municipal wireless networks and public hotspots, some have questioned the ongoing viability of mobile broadband products and services from companies such as Sierra Wireless. Greg Speakman, VP of adapter marketing at the BC-based company, recently spoke with Cristina Howorun, a Toronto-based freelance writer, about the impact of muni-Wi-Fi and other competitive threats on the company's business potential. The following is a transcript of that conversation. Report on Wireless: Many metropolitan cities, such as Toronto, Fredericton and Philadelphia, have built or are planning to build Wi-Fi networks with relatively low, or no cost, access fees. How will this affect demand for Sierra's PCMCIA cards? Greg Speakman: In a bunch of ways. We sell adapter products, PC cards and other products to Canadian cellular carriers. The real key that the cellular companies are providing is one common way of connecting, one common user interface, one common look and feel and one common bill, no matter who the customer is and no matter where they are in Canada. Municipal Wi-Fi is generally in urban areas. It may exist where your office is and not where your home is. The Toronto Wi-Fi system won't provide access in Mississauga or Markham. A cellular carrier would have coverage in all of those areas. That's the big difference. The combination of a bigger coverage area, and the same provider providing you with the same way of getting information and getting access, whether you're in Newfoundland or Victoria.RoW: Do you see these Wi-Fi zones having any type of impact on demand for Sierra's products?GS: I think there's always going to be some type of impact. We find that Wi-Fi, in general, has heightened the awareness of wireless data and what mobility and wireless data can do. 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.RoW: But data packages are still quite expensive in Canada? What type of impact has Wi-Fi's pricing, which by comparison is generally quite low, had on the use and adoption of Sierra's products?GS: Another way to look at this, particularly for business users and people who need access to their information to do their jobs, is to compare what they could potentially spend on Wi-Fi versus what their cellular carriers provide. It's actually not all that different. Because Wi-Fi isn't always from the same provider, you could go to the airport and it might be free but then you go to a coffee shop and pay $10 a day. You could go to a hotel or a conference centre and pay $10 a day. Over the course of a month, if you're a high-intensity user, you could very easily pay more for Wi-Fi than with cellular carriers.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.My understanding of one of the targets of municipal Wi-Fi is to get all the municipal government's functions on there and get the government folks using it. Another of our products, that isn't a main stream product, is our rugged trunk-mount modems. This is something we focus specifically on police forces and large, field service organizations that need something mounted in their trunks. One of the things that it brings to the dispatch side is it's got built-in GPS. So on top of being able to do the data communications, the modem knows where it is. Dispatchers know where a police officer or field service officer is, and that's clearly a set of functionalities that aren't available within the Wi-Fi world. RoW: What type of strategies are you implementing to deal with competition from Wi-Fi "hot spots"- like at airports- and municipal Wi-Fi?GS: I think municipal Wi-Fi serves a different market and a different type of user. It serves someone who using wireless data infrequently and someone who's using wireless data in a very specific location all the time.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 or St. John's.RoW: Sierra recently announced plans to expand their European operations. Does Europe offer greater growth potential than North America?GS: If we look at it as a market as a whole, and not just as Sierra Wireless, I don't believe they are significantly different. Europe's growth rates aren't significantly different. We see that different markets have different growth spurts when different technologies are brought in. Eighteen months to two years ago, the first real 3G networks came online in Europe and they experienced a significant growth spurt in that time. A little earlier than that, the 3G carriers in the United States brought in EvDO rev zero networks, which were dramatically faster in speed, so they had a big growth spurt. There was a growth spurt in North America when realizable speeds broke the 500 kbps barrier, and then there was a growth spurt in Europe when 3G came on. We have more opportunity from a Sierra Wireless point of view, because our penetration in the European market isn't as high as our penetration in the North American market. So there's more opportunity to increase our growth through increasing share in a market that's growing at the same pace as the North American market.RoW: At the 3GSM World Congress, Intel and Nokia announced they were no longer going to pursue a technology alliance to develop HSDPA chips for future Centrino Duo notebook computers. That must've been a sigh of relief.GS: We have two main businesses. I'm the marketing lead for the adapter products but the other side is our embedded business. We make embedded radios and modems that we sell to laptop manufacturers. Had the Nokia/Intel partnership continued, that would have had an effect on our embedded business.We were, and do, and will continue to build embedded modules in the mini-card format that we sell to the laptop folks. We're constantly working with chipset manufacturers; we're constantly doing interoperability testing with infrastructure manufacturers, and those kinds of things.RoW: With regards to your business strategies, would you say Sierra is moving more towards the embedded side of things?GS: I think both sides are growing and growing strongly. Will the embedded business meet and catch up with the PC cards? I'm not sure. RoW: What type of strategies are you implementing to deal with competition from low-cost Asian manufacturers?GS: I think the real key in the wireless data world today is the pace at which technology evolves. There's a constant increase in speed and a constant change in technology. The way we position ourselves, and I think we've been successful in doing that, is we want to be working with the carriers for whom it's important to be first to market with the newest technology and fastest speeds. We work with the carriers who want to get a competitive advantage, and get the latest and greatest out to their end users, as quickly as possible. Our positioning, in the global scheme of things, is to be very early to market with the latest and greatest and fastest networks. Now, there are lower cost providers in the industry. Months, quarters or years after we come out with the new technology, they're able to provide the technology at a lower cost to the carrier. But by that time, we've certainly established ourselves with the carriers and we've established ourselves with our carriers' customers. We've been in the retail stores, we've been in the business-to-business channel and we've got regular customer-pull for our products. I think that's been very successful for us.RoW: Who or what is your biggest competitive threat?GS: We see really two kinds of players in the market. There are the players like us and Option, headquartered in Belgium - the innovators in the market, the first to bring out new form factors, new speeds. Option sells entirely GSM-based product, they don't do any CMA products. They are almost entirely adapter products, and the percentage of their sales in embedded modems is nowhere near ours. There's also a company called Novotel Wireless, based in San Diego, and they have both HSDPA and CDMA products, like us.Then, there's the low cost group - mostly companies from China - that sell more than just modems. These other companies not only sell modems, but they sell infrastructures to the carriers, cell phones and modems. They're the ones that are coming in months and quarters behind us.RoW: So, you're not worried about the low-cost providers or municipal Wi-Fi?GS: I have a former boss who used to say, and he was quoting someone, "only the paranoid survive." In this conversation we've talked about a bunch of things that are very definite parameters in our business. Municipal Wi-Fi is one, and two or three years ago, Wi-Fi in Starbucks was one. There are things that affect us, and affect our business. We need to make sure we manage our business well. We need to make sure that we have the right strategy to be successful. We believe we do.Saying that we're not concerned is an over-statement. These are things we track and follow, and it's part of the competitive business environment. We believe that our product is the best product for our target customers, and the best solutions.

Sierra Wireless sits down with Report on Wireless

News | March 28, 2007

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