In spite of the rough and tumble of the market, investments remain on an even keel in the wireless sector for the first quarter, according to venture-capital researcher Rutberg and Co.
Zeroing in on such areas as 802.11, data acceleration, network software and radio-frequency semiconductors as well as ultra-wideband and ZigBee, the quarterly report from the firm highlights the relative highs and lows of investment in the various subsectors.
“We continue to believe that investors are interested in wireless and we are encouraged by both the funding level and diversity within the sector,” remarked Rajeev Chand, senior equity analyst for wireless at Rutberg.
Exactly 170 wireless companies received $1.1 billion globally, according to the report, representing a 64-percent increase from the fourth quarter of 2002, which attracted $658 million.
The level of funding is consistent over the seven quarters, which averaged $918 million per quarter, according to the report.
On 802.11, which Chand identifies as attracting funding in the area of switches, the incumbents are lagging behind the startups. Some of the small players include Legra Systems, Trapeze Networks and Vivato.
The report said the satellite space attracted $157 million, 802.11 saw $123 million, RF Semiconductors garnered $85 million and carriers received $76 million.
“Many companies have not deployed in large enterprises because of budget constraints and manageability,” said Chand. “The startups are helping the large enterprises to plan, deploy and maintain wireless local area networks.”
He said the semiconductor part in the 802.11 space is maturing and may not expand for up to three years.
On RF semiconductors, the report said such companies as Berkana Wireless, SiGe Semiconductors and SiRiFic Wireless lapped some funds.
Rutberg noted three explanations for interest in this subsector. First, they address fundamental industry needs like demand for devices with higher frequency, multi-frequency and wideband frequency. The second reason is the ability of companies to differentiate themselves. The third point is the flowering of an ecosystem that allows private companies to thrive.
Chand said the RF semiconductor companies will take advantage of their innovations, a combination of low cost, small size and low power as well as a congenial ecosystem to grow and also work with big companies like Texas Instruments Inc. and Motorola Inc., which have strong baseband products and channels.
Another subsector that fascinated investors was the mobile data acceleration market and that sector received $22 million. Recipients include BoostWorks, Flash Networks, Venturi Wireless and Byte Mobile. These companies provide software solutions, which sit on the core network and improve speed and quality of data.
“This is one of the few things carriers are purchasing,” said Chand, explaining that it offers impetus for mergers and acquisitions for three reasons. One, private companies have money. Secondly, OEMs are looking for revenue-based rather than technology-induced acquisitions. Also, the technology benefits from 3G delays.
UWB and ZigBee companies attracted $8 million in venture funding. UWB technology has high bandwidth but short distance and works on home electronics, while ZigBee has low bandwidth and long distance with low latency and is ideal for game pads. Figure8Wireless is one of the ZigBee companies that received funding.
Key uncertainties for UWB include market size, market timing, standards resolution and regulatory risks. For ZigBee, the uncertainties include market size, competition from proprietary solutions and the presence of Bluetooth and 802.11 technologies.
Motorola demonstrated its ZigBee 2.4 GHz technology, which it said is being driven by the ZigBee Alliance. The standard is still in the draft stage.
“The ZigBee protocol addresses the needs of businesses and consumers requiring a low power, highly configurable network standard,” said Behrooz Abdi, vice president and general manager of Motorola’s radio products division.
The report identified two new areas, directory assistance and protocol software, as attracting attention and funding. Absence of a central repository for wireless phone numbers has created the need for DA, while protocol software companies will benefit from multiplicity of and changes within standards by helping to interpret signals. TTPCOM is one of the companies in the protocol software space.
