It appears that the powers that be in the telecommunications kingdom have decided that now is the time to give a real push to both WiFi and WiMAX technologies. Basically, the difference between the two is in range and, as far as I understand it, WiMAX can function and meet all requirements, without WiFi, but not the reverse. The different camps are currently being led by two giant companies, each in a different sector. Intel (Nasdaq: INTC), is taking on WiMAX and has dispatched its technology financing arm Intel Capital on a investment trip across the globe. BT Group (Nasdaq: BT; LSE: BT) is heading up the WiFi camp with its announcement that it plans to cover UK cities in a blanket of WiFi networks.
Intel’s goal is to cover the world in a network of WiMAX systems that will enable high speed, low cost data transmission over broadband networks. Intel does not roll out such systems itself, so it is investing in companies that do. Yesterday, Intel Capital announced an investment in the large Egyptian cellular company Orascom Telecom (LSE:OTLD; CASE:ORTE). At the same time, it also announced it would be entering as a leading investor in Dutch cellular company Enertel NV. Announcing the investment, Intel Capital president Arvind Sodhani said the first stage would be to persuade countries to adopt the WiMAX standard, and at the same time to prepare plans in anticipation of the approval of the standard.
In all, Intel has invested in seven WiMAX companies during the last year. It has invested in companies in, Germany, Australia, Brazil and Mexico. One of the companies in which it is invested, Navini Networks, is a provider of WiMAX base stations and modems, and the other, Beceem, manufactures mobile WiMAX chipsets. Navini Networks is headquartered in Texas and is headed by Roger Dorf, a former Intel manager. Beceem is an Indian company based in central California.
What Intel is doing here is a form of takeover of the future cellular world, provided that WiMAX does catch on as the leading technology for last-mile content transfer over broadband networks. I think that Intel is taking a calculated risk. Governments need to be persuaded to facilitate the introduction of appropriate standards and measures need to be taken to help the business world accept and introduce this technology. Intel is the only one in the field that can make it happen. If it succeeds, it will have built itself a huge market in which it will be the leader. If not, the price will be several billion in cash and few more off the company’s market cap.
What exactly are we seeing here? Once again, it’s the same old scenario that dictates how events unfold in the global technology world. The giants respond to events and sometimes they are the ones that create the market (in this case Intel decided that WiMAX is the future). Since the trend towards WiFi, and quite definitely WiMAX is a given, the question is where do Israeli companies fit in?
The first name that comes to mind when talking about WiMAX is, of course, Alvarion (Nasdaq: ALVR; TASE: ALVR). When a company such as Intel sets out to prepare the world for the advent of WiMAX, it will encounter Alvarion in every God forsaken corner. Moreover, many projects using Intel’s microprocessors are built on Alvarion platforms. At a time when the question surrounding WiMAX is not whether, but rather, when will it be introduced, Alvarion, which has been so closely associated with WiMAX appears to be losing out.
It could well be that many people are disappointed by the fact that Intel has not offered to acquire Alvarion so far, a development that cannot be encouraging for Alvarion given that Intel has been buying WiMAX companies left right and center. An Indian engineer named Himanshu Pandya referred to Alvarion in an article posted yesterday on his private blog. “Alvarion,” he says, “is the best of breed in WiMAX and has partnerships with big names like Intel and IBM. The stock is near its 52-week low and is worth picking up if the weakness continues.” I agree with him one hundred per cent but think that perhaps it would better to wait a bit.
Pandya writes that Alvarion and another company named Airspan Networks Inc. (Nasdaq: AIRN), headquartered in Boca Raton in Florida, are “two WiMAX stocks attractive at their current valuations.” It often happens that stocks go down when investors tire of waiting for the dream to come true. I think that the slight fall in company sales in 2005 worried investors who made a rush for the exit as the year progressed. This was the main reason for the fall in the stock. The company posted losses during 2005 and continued to do so in the first quarter of 2006.
Investors don’t like to hear repeated promises that don’t produce results, and when any results do emerge they are not the kind they were waiting for. No one is denying that in 2004 we saw WiMAX strike the hot iron and nothing happened afterward. But something is indeed happening, long after the promise was made, but nonetheless a development and a positive one at that. I have lost money hand over fist on this stock but I hope the belief in the company will eventually win the day.
To all those who bemoan the blow Alvarion has suffered I will simply say this: Nothing has changed since the stock reached $17. The recent developments have taken WiMAX one great step forward. While I cannot make a recommendation wholeheartedly, I am convinced that this is an investment that will deliver, big time.
Published by Globes [online], Israel business news - www.globes.co.il - on May 25, 2006
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