NEW YORK-Although Sprint PCS announced earlier this year its subscribers with smart phones had reached 1 million, “the number doesn’t mean anyone is using them and the smart phones are anything but,” said Joe Korb, president of GoAmerica, at the Angelbeat “Internet Untethered” conference earlier this month here.
It took a decade for cellular voice calling to transition from a business tool to a widespread form of consumer communications. While the wait for wireless data to reach its mass market potential likely will be shorter, it still is a good way down the road, at least in his view.
“There is nothing to suggest the increase in penetration of digital wireless will not continue in the United States, which is under-penetrated. A lot of marketing money is being spent to create consumer demand, but it’s not there yet,” said the executive of this wireless Internet service provider, which is based in Hackensack, N.J.
“If we wait for 3G to come to market, we will be waiting a long time, and the capital markets want to see results now. Devices and air link speeds are primitive. Don’t look for home runs, but you can get something going … The (enterprise) customers are there, but you need to do a lot of heavy lifting to convince them.”
While GoAmerica’s Korb sees a consumer market for wireless data over the long term, Anthony LaPine, chief executive officer of Semotus Solutions, San Jose, Calif., does not view business-to-consumer communications as potentially profitable.
“We don’t believe in the B-to-C market because everything in that space eventually will be free,” he said at a recent Wall Street Analyst Forum.
Known as Datalink.net until late January, Semotus still receives about $50,000 in monthly revenues from an early foray into the business-to-consumer market, offering real-time stock quotes to wireless devices. People willing to accept a 20-minute delay can easily get quotes for free, but it is hard to find instant information of this kind, he said. However, the company has steered away from that niche along a course targeted at corporate customers with mobile workers.
Having garnered a large patent portfolio in wireless Internet technology since its founding in 1993, Semotus is positioning itself to be a long-term survivor among wireless application service providers. That positioning extends both to markets and marketing.
“In August, we experienced the Nasdaq meltdown and returned to AMEX (the American Stock Exchange), the only company to do so voluntarily, I am told. We are very happy with our specialists at AMEX because you need them in markets like these,” LaPine said.
Specialists are exchange members subject to strict minimum capital requirements whose roles are to maintain a fair and orderly market in one or more securities. Nasdaq is a computerized system that provides brokers and dealers with price quotes.
Semotus also has been on a buying binge lately, acquiring companies with rosters of customers that make good candidates for the addition of wireless connectivity for their enterprises. Most recently, it announced April 9 it had completed its acquisition of WizShop.com, a Sherman Oaks, Calif., company that builds and maintains electronic commerce infrastructure for Internet service providers.
However, LaPine said Semotus has neither fear of competition from newcomers into the WASP space nor any intention of acquiring them “because most have no customers and no revenues.”
Citing investor confusion about the WASP model, LaPine defined it as one of integration between desktop computers and thin clients and associated value-added services, like alert-based notifications.
“The killer app is whatever a corporation needs,” said LaPine, whose company counts AT&T Corp., Lucent Technologies Inc., Qualcomm Inc. and Motorola Inc. among its Fortune 500 customers.
“Others, like GoAmerica, OmniSky and AvantGo, play a different game. It’s the WISP model of I’ll give you a device and airtime,” LaPine said.
“They are helping us by putting more devices into people’s hands, but it’s a painful business model because there are no barriers to entry. Anyone can be a reseller.”
AvantGo, headquartered in Hayward, Calif., has its own compelling value proposition, Felix Lin, chairman and co-founder, said recently at the New York Society of Security Analysts’ “Pervasive Computing” conference.
“We have a radically different approach to mobile computing. Online information is buffered on the device. We have the only solution that works online and off-line without disruption,” he said.
Aether Systems, Owens Mills, Md., which Semotus Solutions views as a key competitor, also has made its share of acquisitions to keep pace with opportunities and demands, said Brian Keene, executive vice president of corporate development.
“Our acquisition of RTS Wireless on Long Island gave us a carrier-based technology that can be used in enterprises … We will unify it with AIM, our original messaging software, which does encryption and compression to reduce latency,” he said at the NYSSA meeting.
“A year ago, it was more about growth. This year, it’s more about profitability. We are looking hard at acquisitions, trimming back but not really getting out of anything we got into.”
Summit Strategies, a Boston research firm, categorizes companies like Aether and Sapient as part of the top tier of WASPs, those that provide customized services with high functionality and high cost.
Packaged applications and services offering strong functionality, minimal customization and moderate cost are emerging now and could well become the largest category, said Warren Wilson, senior analyst for Summit. Hosted services are the cheapest option for companies, but they provide very limited access to corporate applications and data.
As large companies, the early adapters, provide mobile access to increasing amounts of mission critical data, they are likely to bring the outsourced provision of these services in-house, said Tom Kucharvy, president of Summit Strategies. Aether’s Keene said his company already has anticipated the trend. “Behind the firewall solutions will be a reality, and we offer them,” he said.
Increasing standardization of the technology and familiarity with it will enable large companies to internalize the process of keeping their mobile workers connected to the enterprise, but doing so will prove too expensive for small and medium-size companies, Kucharvy said.
“The hosting companies of tomorrow won’t be the same ones that now call themselves Wireless ASPs,” said Jen DiMarzio, a Summit Strategies analyst.
“Wireless ASPs may evolve into consulting, and the larger ones may move into packaged offerings. Traditional ASPs and wireless ASPs may well work together.”
