Motorola's WiMax Wait
Motorola Inc. (NYSE: MOT) isn't expected to see revenues from its early adventures in the mobile WiMax field for at least 12 months -- and possibly much longer.
The No. 2 handset maker in the world snagged a slice of what are arguably the two highest profile WiMax deals in the U.S. recently. The Schaumburg, Ill.-based company is one of the three major infrastructure suppliers for Sprint Corp. (NYSE: S)'s planned $3 billion mobile WiMax network, along with Nokia Corp. (NYSE: NOK) and Samsung Corp. . Sprint is planning to have initial service from its 1,000-site deployment up and running by the end of this year with full commercial service coming in the first half of 2008. The company is investing undisclosed amounts in the infrastructure and marketing of this new network. (See Sprint Picks Nokia for WiMax and Sprint Goes WiMax.)
Motorola is also working with Sprint's first real rival in the emerging American WiMax market -- Clearwire LLC (Nasdaq: CLWR) -- a well-funded startup that already has fixed wireless sites up and running and plans to go mobile as soon as possible. Motorola is working on deployments in Portland and Seattle with Clearwire, which is the latest venture from serial wireless entrepreneur Craig McCaw. (See Clearwire Takes Another Cut at IPO.)
Motorola highlighted both contract wins on its recent fourth-quarter earnings call. However, it could be a while before the firm sees any real payback from its early WiMax deployments, as Ovum Ltd. analyst Roger Entner points out: "WiMax is certainly an investment area rather than a profit area for any company involved in it."
Prudential Equity Group LLC analyst Inder Singh is not expecting vendors to see profits from WiMax for twelve months or more. "Large-scale deployments, profitable ones, may still lie more than a year or two away," he tells Unstrung.
An ongoing issue with the Sprint deployment is the fact that none of the vendors involved have yet agreed on a common specification for the mobile technology, according to Singh. "As I say, 'It's all ice cream, but it's chocolate, strawberry, vanilla, and raspberry,'" he jokes. (See A Giant Leap Towards 4G.)
This could potentially hold up the trickle-down of WiMax technology from standalone modems and CPE units into laptops and finally handsets. "WiMax outside of the laptop still looks far away to me," notes Richard Windsor, analyst at Nomura Securities .
Prudential's Singh sees agreement on a specific mobile specification as a crucial key to unlocking the promise of WiMax. "The thing that will be needed for nationwide deployment is agreement on a common version and then the work comes in of getting handsets that can work on WiMax, but also work on Sprint's much larger CDMA network," he says.
He reckons Sprint is already tacitly acknowledging that ironing out the kinks in mobile WiMax could take some time. "In its most recent earnings report, Sprint said it was now going to spend 50 percent more on its CDMA network than they figured just a few months ago," Singh notes. "That suggests even they realize WiMax may not be ready for primetime."
— Dan Jones, Site Editor, Unstrung