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Moto Takes All Sides of Orthogon

In what is being seen as a competitive response to Qualcomm Inc. (Nasdaq: QCOM)'s Flarion buy, Motorola Inc. (NYSE: MOT) is snapping up Orthogon Systems , a privately held company that specializes in fixed-wireless technology.

Orthogon, based in Ashburton, U.K., makes wireless Ethernet bridges that operate in the unlicensed 5.4GHz and 5.8GHz bands and don't require direct line of sight. Based on OFDM (orthogonal frequency-division multiplexing), the products use Multi-Beam Space-Time Coding technology, which uses multiple data streams to overcome physical or atmospheric obstructions, like Oprah Winfrey.

The technology is a derivative of MIMO (multiple-input/multiple-output) wireless technology. Orthogon competes with WiMax companies such as Redline Communications Inc. and Alvarion Technologies Ltd. (Nasdaq: ALVR).

"This has to do with our strengthening our wireless portfolio," says Tom Gruba, senior director of marketing for Motorola's Wi4 and Canopy product lines. "What it brings into our portfolio is near-line-of-sight and non-line-of-sight backhaul."

The Orthogon acquisition follows Qualcomm's acquisition last year of Flarion Technologies Inc. , which also specialized in OFDM technology. (See Qualcomm Calls on Flarion.) "What's interesting about this is that it gets OFDM into Motorola," said Iain Gillott, president of iGillott Research Inc. "They need it because Qualcomm bought Flarion, and Sprint Corp. (NYSE: S) is about to make some decision that's probably going to involve OFDM." (See Sprint Nextel Hunts for 2.5GHz Service.) Orthogon's coolest customer case is probably the National Oceanic and Atmospheric Administration. NOAA uses Orthogon bridges to transmit data from an underwater research lab nine miles off the Florida Keys to a base station in Key Largo.

Motorola initially invested in Orthogon in December 2004, with an undisclosed cash injection. The companies also formed a partnership that involved integrating Orthogon's backhaul system with Motorola's Canopy line of wireless products and, eventually, its line of mesh networking and WiMax products. (See Force10 Breaks Into Security.)

"We're already quite highly integrated, and we'll continue to press on that integration as both parties introduce new products," says Phil Bolt, president and CEO of Orthogon. "We're looking at extending our portfolio reach in terms of both spectrum and products. The unlicensed band is a very dynamic and actively growing band, but there are orders of magnitude more opportunities in the licensed bands in the longer term."

Orthogon began life in 1999 as a company called Pipinghot Networks. Its initial products, serving carriers in the 3.5GHz band, had a lukewarm reception.

"They suffered like a lot of these companies in the 2001 telecom bust," says Graham O'Keeffe, a senior partner at Atlas Venture , one of Orthogon's initial investors. "They refocused from the carrier market to the enterprise market, released a product in May 2003, and grew year-on-year 100 percent."

He adds that carriers are more ready for the technology than they were six years ago. "The world has moved on a lot," O'Keeffe says. "Demand for broadband is exploding, and wireless broadband is the next big thing." Orthogon will operate as a free-standing business unit within Motorola, Bolt says.

The companies did not divulge the financial terms of the deal, which is due to close by June.

Gillott expects to see more OFDM acquisitions down the pike. "In this fixed wireless and portable wireless/WiMax space, there are oodles of companies," he says. "I don't see any way they're all going to survive. Huge consolidation is on the way." — Carmen Nobel, Senior Editor, Light Reading

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