Longtime wireless modem maker Sierra Wireless announced a significant new business direction with the unveiling of its Voq phone-a device that marks the arrival of a new smart-phone player and another Microsoft Corp. backer.
Investors seemed cheered by the bold move, sending Sierra’s stock up almost 9 percent to $18.01 per share following the news.
Sierra is fresh from its $20 million acquisition of fellow modem maker AirPrime, a move that put the company at the top of the wireless modem market. The Voq marks an entirely new business for the company, which has been making and selling CDPD, GPRS and CDMA 1xRTT modems since its founding in 1993.
Sierra’s Voq (pronounced vock) offers a range of advanced features. The GPRS/GSM device uses Microsoft Corp.’s Smartphone 2003 operating system, a 200 MHz Intel Corp. processor and 48 MB of ROM and 32 MB of RAM. It also features a SD/MMC card slot and a USB port. The Voq is scheduled to be available in Western Europe and North America in the first half of next year, with trials slated to begin in the first quarter. Sierra said electronics manufacturer Flextronics International Ltd. will build the device. The price hasn’t been set, but Sierra said it will be comparable with other smart phones like the $300 Nokia Corp. 3650.
Sierra touted several notable features that sets the Voq apart from other smart-phone offerings. On the software side, Sierra developed a new storage, navigation and retrieval method based on keywords, which allows users to search the device for documents and information rather than pilot through a menu. The device also features wireless e-mail support for Microsoft Exchange, Lotus Notes and Novell GroupWise, a service that Sierra said does not require the installation of a corporate server. But perhaps the most notable aspect of the device is its keypad; the phone features a standard 10-key mobile-phone keypad that flips open to reveal a tiny QWERTY keyboard.
“The phone form factor was critical for success,” said Larry Zibrik, product line manager for the Voq. “We saw a lot of PDAs and handhelds in desk drawers.”
Zibrik said Microsoft’s Smartphone operating system was a natural choice, as the software giant “owns the enterprise” and offers a flexible mobile-phone platform. Sierra made several modifications to Microsoft’s operating system by adding a notes program and cutting down the number of keystrokes for a text message from 12 to two, Zibrik said. Sierra also will use Microsoft’s 2003 software rather than the 2002 version, as it includes several improvements.
However, Microsoft may not be Sierra’s only operating system partner.
“We don’t discount that we might expand beyond it, but we think we have the right horse now,” Zibrik said.
Beyond the Voq itself, Sierra faces a variety of smart-phone players in an uncertain market. The company declined to provide revenue or sales expectations on the device, numbers that may be provided during the company’s earnings call this week. However, Zibrik defended Sierra’s move into the market.
“We believe that we’ve chosen our market well, and we’ve differentiated our product well,” he said.
Others seem to agree.
“While it may seem that Sierra is a late entrant to the smart-phone marketplace, we believe this is not the case,” wrote BMO Nesbitt Burns in a research note. The firm maintained its rating on the company but raised its target share price. “We believe that Sierra’s entry into that market at this point is less risky and less expensive than launching a product one year ago.”
Indeed, analysts predict the market for smart phones will see rapid growth over the next few years. IDC forecasts smart-phone shipments will grow 111 percent to 30 million units by 2007. However, the market is only in its infancy.
“The smart-phone market is an area that looks like it could become somewhat overpopulated in the near term,” said Bryan Prohm, principal analyst in mobile phones for research firm Gartner Dataquest.
Zibrik said Sierra has been working on the Voq device for almost 18 months. Sierra currently sells embedded modem modules to device makers like Handspring Inc. and Hitachi, along with PC modem cards through carriers like T-Mobile USA Inc., AT&T Wireless Services Inc. and Vodafone Group plc.
