Flarion Preps OEM Deals
Flarion has publicly announced only a single OEM deal with Siemens AG (NYSE: SI; Frankfurt: SIE) for the use of its Flash-OFDM kit in the 450MHz band (see Flarion Flashes With Siemens). OFDM is a modulation scheme that can support an average data rate of around 1.5 Mbit/s for users in a standard, PCS-sized cell site, while using only 1.25 MHz of spectrum. This makes it approximately four or five times more spectrally efficient than comparable 3G technologies, such as CDMA2000 or UMTS -- and cheaper to implement.
Despite such advantages, Flash-OFDM is a proprietary technology and faces a battle to win the attention of carriers already committed to rival 3G standards. “Flarion needs to build some major Tier 1 OEM partners,” notes Current Analysis’s Peter Jarich in a recent report. The merger of Sprint and Nextel makes it unlikely that Nextel will go ahead with plans to adopt Flarion technology (see Deal Solves Nextel 3G Dilemma).
"The fact remains that no major operator is likely to go with a startup which is not yet linked to a major infrastructure vendor,” Jarich writes. Flarion's possible success with T-Mobile International AG probably relies on Flarion's OEM deal with Siemens (see T-Mobile Favors Flarion ).
Flarion’s VP of global communications and marketing, Ronny Haraldsvik, states that “further OEM agreements will be announced in 2005,” but declines to reveal details.
Unstrung has heard rumblings of deals with Motorola and Nortel for some time, and each appears an obvious ally for the startup.
Motorola has previously teamed with Flarion on a public safety project in Washington, D.C., prompting speculation of future closer ties between the two companies (see Moto's Flarion Call? and Flarion & Friends Get Gov't Gig).
Meanwhile Nortel provided infrastructure equipment and enterprise customers for Flarion’s high-profile trial with Nextel and has publicly praised Flash-OFDM technology in marketing presentations (see Nextel Launches Flash-OFDM). Flarion’s president, Mike Gallagher, was also senior VP for worldwide sales and operations at Nortel’s IP Services business unit.
“Both Nortel and Motorola are the obvious choices,” argues Andy Fuertes of Visant Strategies Inc. “Flarion’s marketing has suggested to me that their relationship with both of those could evolve beyond what is public knowledge... Both Motorola and Nortel have a lot to gain, since neither is an overall market share leader in the infrastructure space.” “Nortel and Moto make sense,” concurs Current Analysis’s Jarich.
Neither company is denying a potential tieup. "We only discuss announced relationships publicly so unfortunately there is nothing that we can say at this time," states a Motorola spokesperson.
“Nortel has not announced any OEM relationship with Flarion regarding Flash-OFDM technology, so I am unable to confirm,” adds Nortel spokesman Ben Roome.
As for the remaining vendor candidates, analysts claim Ericsson AB (Nasdaq: ERICY), Lucent Technologies Inc. (NYSE: LU), and Nokia Corp. (NYSE: NOK) are unlikely bets. “Given their 3G position, they would argue that EV-DO and HSDPA get you most of the functionality of Flash-OFDM along with a global base of standards,” says Jarich.
That leaves Alcatel SA (NYSE: ALA; Paris: CGEP:PA) as the only other big-name hope. “I would not rule out Alcatel in the future,” comments Visant Strategies’ Fuertes. “They have a strong international presence and, like Siemens, they appear eager to expand their product offering to include TD-SCDMA, WiMax, and possibly others. Acquiring market share would not hurt Alcatel either.”
— Justin Springham, Senior Editor, Europe, Unstrung