Puma Technology (Nasdaq: PUMA). The firm's mobile device management software allows handheld wireless devices to hook up to corporate Intranets. Year-to-date return as of Dec. 10 -- 2,700%. Chart
Phone.com (Nasdaq: PHCM). Develops servers and browser software for wireless data transmission. Year-to-date return -- 1,738%. Chart
Metricom Inc. (Nasdaq: MCOM). The firm's Ricochet network enables wireless remote access to the Internet and corporate LANs. Year-to-date return -- 1,683%. Chart
Qualcomm (Nasdaq: QCOM). Develops and licenses wireless chipsets based on its CDMA (Code Division Multiple Access) and cdmaOne technologies. Year-to-date return -- 1,411%. Chart
ARM Holdings (Nasdaq: ARMHY). Licenses high-performance, power-efficient RISC (reduced instruction set computer) microprocessors used in mobile phone handsets and a variety of other devices. Year-to-date return -- 969%. Chart
Some observers will undoubtedly chalk up such short-term value explosions to little more than equally irrational doses of corporate hype and investor hysteria. But even the most ardent cell phone hater will be hard-pressed to ignore the eventual impact that the roll out of wireless data services will have on the telecommunications landscape in the years ahead.
Depending on who you listen to, the size of the wireless data services market in the very near future will fall somewhere in the range from big to VERY, VERY big. Analysts at CIBC World Markets provide a low-ball figure of a $21 billion market by 2004. Meanwhile, Nortel Networks (NYSE: NT) and British Telecommunications (NYSE: BTY), two firms with a great deal at stake in the wireless data world of tomorrow, are much more aggressive in foreseeing a global market of $60 billion to $80 billion five years from now.
Regardless of which forecast ends up being more accurate, everyone seems to agree that sustained triple-digit percentage growth from the market's current size of $500 million this year is a no-brainer over the next several years. Such heady growth rates make wireless data communications one of the fastest-growing industries on the planet, a fact that inflated the share prices of the vast majority of mobile communications companies this year like an NFL lineman's waistband after Thanksgiving dinner.
The usual wireless suspects, such as handset dominator Nokia (NYSE: NOK), digital signal processing (DSP) chipmaker Texas Instruments (NYSE: TXN), and international mobile services provider Vodafone AirTouch (NYSE: VOD), continued their bang-up performances in 1998 with further gains this year. But in a marked change from last year, a slew of smaller fish posted much larger advances as investors tried to divine who the next big winners will be in a wireless market that is still largely trying to define itself.
In its current state, the emerging wireless data business is more or less a technological free-for-all that is beginning to resemble the Oklahoma land grabs of the late 19th century. The industry is long on lingo, but short on standards. Tugs-of-war between competing technologies will provide plenty of opportunities for wireless companies to flex their muscles as everyone dashes willy-nilly to grab their respective share of the coming market.
Currently, the most visible -- and perhaps important -- struggle involves the move toward so-called third generation, or 3G, wireless networks, which will be more data-friendly than today's second generation digital wireless voice networks. Data is expected to account for 25% of the traffic on all wireless networks by 2002, up from 2% of traffic today, according to Nortel. Companies are looking to 3G technologies to handle the onslaught of high-speed data services while also serving the ever-growing need for voice capacity. But the switch from 2G to 3G is not a simple hop, skip, or jump. Bridging the gap between the generations is an alphabet soup of competing 2.5G technologies, all of which are looking to become interim standards in their own rights, even if only for a few years or so.
In the U.S., a line of demarcation separates the 2.5G plans of wireless network operators like Sprint PCS (NYSE: PCS) and Bell Atlantic Mobile (NYSE: BEL), which use CDMA technologies, and the time division multiple access (TDMA) and Global System for Mobile Communications (GSM) networks run by AT&T Wireless (NYSE: T), VoiceStream Wireless (NYSE: VSTR), and others. The transition from today's second generation CDMA technology to 3G cdma2000 should be relatively smooth, thanks in part to a stopgap technology called 1xRTT that will probably not require a great deal of heavy infrastructure lifting by the CDMA networks. The TDMA and GSM operators will not be so lucky, however.
Wideband CDMA (W-CDMA) is the 3G destination of choice for today's TDMA and GSM networks. But unlike in CDMA-land, the main 2.5G overlay technologies coming to the fore, known as Enhanced Data rates for Global Evolution (EDGE) and General Packet Radio Service (GPRS), will necessitate new software, router, and Internet protocol (IP) backbone investments by the network operators. On top of all that, a bigger chunk of the wireless frequency spectrum will be needed for the new technologies to work right. Making the situation even more messy, EDGE and GPRS will only help on the data side of the equation, meaning the TDMA and GSM networks will need to keep spending to boost their separate voice capacities as more users go wireless in the next few years.
If all goes according to plan, 2.5G networks should be up and running in the U.S. by 2002 or so, when Nokia is predicting the number of global wireless subscribers will hit 1 billion. By that time, 1999 buzzwords such as WAP (short for Wireless Access Protocol, which is a solution for delivering Internet content to wireless devices), Bluetooth (a radio chip technology that allows mobile phones and PDAs (personal digital assistants) to communicate with nearby PCs without wires or infrared interference), and VPN (Virtual Private Networks that enable secure connections with corporate LANs from the Internet) could become as familiar to investors as Moe, Larry, and Curly.
As companies race with one another to usher in a world of Web-in-your-pocket connectivity, investors can expect the frenzied excitement characteristic of today's wireless data industry to continue to swell in the years to come. Like the shift from land-based to air-based travel earlier this century, the sky (and quite possibly even outer space) seems to be the limit for companies on the vanguard of the wireless data movement.