Subject: [NEXTEL-1] United States: Wirless technology provider tries to forge new market

From: [email-masked]
Date: Mon, 19 May 2003 12:43:27 -0400

United States: Wirless technology provider tries to forge new market
Source: Global Finance
Publication date: 2003-04-01
Arrival time: 2003-05-17

COMPANIES ON THE MOVE

FLARION TECHNOLOGIES

"The global slowdown has helped us. Carriers are used to buying from
providers that cost five times more." -Mike Gallagher, Flarion

Flarion Technologies is a company without any revenues and without any
paying customers. But the four-year-old New Jersey firm believes it will
play a big part in the future of the business wireless data market.

Flarion has developed technology-called flash-OFDM and originated in Bell
Labs-- that's intended to allow wireless carriers to provide mobile wireless
broadband data service that is twice as fast as 3G and even faster than
Wi-Fi. It promises to allow customers the same speed and reliability they
are used to in their office or home, in a WAN (Wide Area Network)
environment.

The company, which was spun out from Bell labs and its parent Lucent,
has forged trial agreements with six telecom operators worldwide,
including Nextel Communications and three South Korean wireless
providers-SK Telecom, Korea Telecom and Hanaro. The upstart Flarion,
which has more than 140 employees in three offices in the United States,
United Kingdom and South Korea, is trying to establish itself as an
alternative to 3G, 2 1/2 G and Wi-Fi technologies.

The company is banking on the strength of its technology, enabling
high-speed and high-capacity wireless data and voice at lower costs. "This
is a disruptive technology. It's a DSL-like experience on a mobilized basis.
On top of that it does voice as well," says Mike Gallagher, president of the
privately held Flarion and formerly an executive with Nortel Networks.

The OFDM technology allows mobile operators to hook up corporate LANs
with wireless WANs. "The Marion technology offers a solution that from a
technical standpoint is designed specifically to extend Internet protocol to
the wireless environment," says Philip Marshall, director of wireless mobile
technology research at the Yankee Group, a Boston-based technology
and communications research and consulting firm. It does so without
companies having to make significant changes to their existing legacy
systems, he adds.

THE PITCH

Marion's flagship product is the RadioRouter base station (the firm was
initially called RadioRouter). It's essentially a big box that transmits
Internet data over radio waves. The system, which leverages existing cell
sites and radio spectrum, allows wireless network operators to connect
large numbers of mobile users to the Internet.

Marion's technology involves packet-based architecture instead of the
common circuit-based systems that are prevalent in the wireless world.
Specifically, it uses a digital modulation that splits the wireless signal into
several different strands at different frequencies. This allows wireless
carriers to transmit more data more quickly and more cheaply than 3G
and Wi-Fi rivals can, Marion executives say. In fact, they boast that
savings could be as much as 70% to 90%. Building out a wireless network
for 20 million wireless users, with Flarion's OFDM technology, would cost
$200 million, or $10 per user, Gallagher says.

Marion's target market is the 250 major wireless carriers around the world
(firms such as Vodafone, Sprint, Nextel, Verizon and many smaller
providers), serving about 200 million subscribers. Many of these firms are
mired in heavy debt and weak cash flows after spending billions on
expensive 3G licenses only to see a global economic and business
slowdown ensue.

That could be viewed as both an opportunity and a problem for Marion's
efforts to gain a foothold in the wireless market. On the one hand, these
telecom giants are resistant to any new spending. But on the other hand,
they're receptive to low-cost technology alternatives. "In a weird, perverted
way [the global slowdown] has helped us. The carriers are used to buying
technology from their traditional provider that costs five times more," says
Gallagher.

Flarion president Mike Gallagher

SOUTH KOREA

Marion has been aggressive in targeting the South Korean wireless
market, successfully luring SK Telecom, Korea Telecom and Hanaro
Telecom to test its technology, because of the willingness of wireless
carriers and users to adopt new technologies. "The Korean operators have
taken the initiative to be at the forefront of mobile broadband. Korea is
extremely interested in the next generation networks," says Ronny
Haraldsvik, senior director of marketing strategy at Flarion.

The country has more than 32 million mobile telephone users and more
than 10 million high-speed Internet subscribers, giving it one of the highest
rates of broadband penetration in the world. KT, Korea's biggest broadband
Internet service provider, will test Marion's RadioRouters in Seoul in April
as part of its effort to expand its mobile business.

CHALLENGES

The most pressing challenge Flarion has is to convert promise and
potential into reality. Specifically, the wireless start-up needs to convert its
trial participants into commercial customers. "It's one thing to get to a
trial. The next challenge for them is to get to paying customers," says
Yankee Group's Marshall. "They have a good technology; it's a matter of
getting it implemented into the marketplace."

On that note, Flarion's Gallagher says the firm's technology will be
deployed or installed in 10 to 12 carriers by the end of the year, at which
time the fledgling firm will also have its first paying commercial customers.

Flarion has disclosed $62 million in funding it has raised from venture
capital, wireless and other technology firms. Its investors are Cisco
Systems, Bessemer Venture Partners, Charles River Ventures, Equitek
Capital, New Venture Partners, Nassau Capital, Pequot Capital and SK
Telecom.

Flarion has raised an additional "substantial" amount, which it won't
disclose, that will enable the company to bring its product to market
without having to raise additional funds."We're not seeking any additional
funding to support commercial orders," says Haraldsvik. "In these
economic times, it's impressive for a company like Flarion to have the
necessary funding to take us all the way."

He concedes that Flarion has a lot to prove to the marketplace but says
that this year it will. "We will show the world in 2003 that we're not only
commercially ready but that we're taking commercial orders," says
Haraldsvik.

We shall see. -Adam Rombel

COMPANY SNAPSHOT: FLARION INDUSTRIES

* FOUNDED: In 1999 by Rajiv Laroia, who is the company's chief
technology officer.

* HEADQUARTERS: Bedminister, New Jersey (with offices in London and
Seoul)

* CHAIRMAN & CEO: Ray Dolan

* EMPLOYEES: Approximately 150

* WEB SITE: www.flarion.com

* DESCRIPTION: Flarion has developed technology-called flash- OFDM
and originated in Bell Labs-that's intended to allow wireless carriers to
provide mobile wireless broadband data service that is twice as fast as 3G
and even faster than Wi-Fi. It promises to allow customers the same
speed and reliability they're used to in their office or home, in a WAN
environment.

* SALES: None. Flarion expects to book its first-ever revenues in the
second half of 2003 as it signs up its first paying customers.

* CUSTOMERS: Flarion has market trials under way with Nextel
Communications, SK Telecom, Korea Telecom and Hanaro Telecom.
The company expects to have 10 to 12 wireless carriers as customers by
the end of the year.

* INVESTORS: Cisco Systems, Bessemer Venture Partners, Charles
River Ventures, Equitek Capital, New Venture Partners, Nassau Capital,
Pequot Capital and SK Telecom.

Sources: Flarion, Global Finance research

http://cnniw.yellowbrix.com/pages/cnnmoney/Story.nsp?story_id=38849825&ID=cnnmoney&scategory=Business+and+Finance&

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