As third-generation technology and wireless broadband hit the U.S. marketplace, PC card vendors finally may hit their stride.
Verizon Wireless is in the process of expanding its CDMA EV-DO network throughout its coverage area, while Sprint Corp. launched its own EV-DO service in 17 markets-with more on the way. Such networks offer speeds comparable with that of high-speed wired Internet connections.
Further, Cingular Wireless L.L.C. plans to launch W-CDMA/High-Speed Downlink Packet Access services starting this year, and it promises to offer blazing-fast speeds of between 400 kilobits per second and 700 kbps.
Mobile phones likely will remain users’ primary connections to such networks. However, many in the industry expect PC card sales-which have long struggled under sluggish network speeds-to pop open with the arrival of 3G services.
“There’s latent demand for that in the enterprise market,” said Chris Ambrosio, director of the wireless device strategies service for research and consulting firm Strategy Analytics.
Indeed, Strategy Analytics forecasts PC card shipments will almost double this year compared with last year, from 630,000 to almost 1 million. Novatel Wireless Inc. and Sierra Wireless Inc. have been leading the charge, with Sony Ericsson Mobile Communications L.P., Kyocera Wireless Corp., UTStarcom Inc. and Option N.V. also playing in the market. Ambrosio said the jump in PC cards sales is largely due to workers’ pent-up demand for high-speed wireless services.
“The PC card industry has been relatively weak over the past three years due to the slow wireless networks that have been in place,” wrote ThinkEquity analyst Jason Tsai in a recent research note. The firm makes a market in the securities of Novatel. “We believe that the higher-speed 3G networks should accelerate user adoption of PC cards.”
Mobile workers represent the primary audience for PC cards. Such services give workers access to corporate Internet information, including e-mail and sales applications. Wireless carriers have priced PC card services at a premium-both Verizon and Sprint charge $80 per month for unlimited use. However, Sprint and Verizon are subsidizing the cost of PC cards; in some cases they are available free with service plans. Although Verizon offers both EV-DO PC cards and mobile phones, Sprint offers only PC cards.
The two leaders in the PC card market are Novatel and Sierra. Neither company releases figures for their PC card sales, but industry observers generally agree Sierra retains the lead in the market. However, that may change soon.
Sierra has recently suffered several serious blows. The company’s revenues have faltered, and its attempt to break into the smart-phone market ended in spectacular failure. Sierra’s dalliances with smart phones also have slowed its work in the PC card market-the company dropped plans to build W-CDMA PC cards in favor of HSDPA cards.
“We believe shares of Sierra are in a show-me phase following the falloff of revenue in the first quarter, the exit of the Voq (smart-phone) business and its search for a replacement CEO,” wrote John Bright of Avondale Partners in a research note. The firm makes a market in Sierra securities. “On the other hand, Novatel is our top pick for 2005 because we believe they have created the right set of circumstances to succeed.”
Novatel has managed to sell EV-DO PC cards through Sprint and Verizon and sells W-CDMA cards through carriers in Europe. The company also is locked in a race with Sierra to supply HSDPA cards to Cingular when the carrier launches its 3G services later this year. Interestingly, both Sierra and Novatel have said they are working with laptop computer makers to install 3G modems directly into laptops-a potentially major opportunity for PC card vendors.
“Novatel has been more aggressive than Sierra in getting into this space,” agreed Strategy Analytics’ Ambrosio.
Although PC cards represent a potentially major opportunity for wireless, some caution that the PC card market cannot support itself. Industry analyst Andrew Seybold recently wrote that there are not enough laptop users to pay for the cost of deploying a 3G system-mobile-phone users must be added to the mix. Seybold’s assertion is backed by the failure of Monet Mobile Networks Inc., which offered EV-DO Internet connections to computer users until it closed its doors last year.
