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Companies See Hope for Future in Growth of Wireless

Companies See Hope for Future in Growth of Wireless By CARLOS MARTINEZ Staff Reporter The wireless sector is helping some local tech companies rebuild their bottom lines. Although industry watchers are uneven in their predictions for wireless, it is considered by many to be one of the few bright spots in the technology industry and it has begun to attract a number of companies aiming to grab a share of a small but slowly growing market. Although wireless technology has been around for years, only the last two years has the technology become more widely accepted and costs for the products have dropped enough to appeal to companies and consumers. With more people owning pocket digital assistants, or PDAs, along with high-end cell phones that can access the Web and send pictures back home, the wireless industry appears ready for a growth spurt. Also fueling this is the desire by some companies to seek alternatives to the high cost of high-speed data transmission and Internet lines. Calabasas-based test equipment provider Ixia, whose revenue dropped by 13 percent last year after a flat 2001, is stepping into the wireless industry after acquiring development and distribution rights to Chariot software and its line of products earlier this year. Chariot is a high-end system that tests software on wireless networks for full scale connectivity through a variety of traffic types such as voice over Internet protocol, multicast and business-related transactions. The program was developed by NetIQ Corp. and purchased by Ixia for $17.5 million as part of its efforts to bolster its revenue. “One reason for getting Chariot was to open up new markets for Ixia and develop a large customer base for the products,” said John Wood, Ixia’s director of software applications. Although the company won’t say how much it expects to make this year from Chariot, its efforts are well intended, said Jonathan Kramer, president of Santa Monica-based broadband and telecommunications consulting firm, Kramer.firm. “Wireless is where the Internet was several years ago,” Kramer said. “It was new and just starting to catch on and wireless is just now demonstrating its need.” Kramer estimated the wireless industry growing at roughly 10 percent next year with local companies taking a share of that growth. But while the wireless market is just beginning to grow, Kramer says businesses and consumers have been slow to adapt to it. “Some people are still learning about it and others are trying to get the money to go to a wireless network, so it’s a money issue and a marketing issue,” Kramer said. “But these Valley companies are focusing on a niche that can grow, so that’s smart.” Growth of ‘hot spots’ A recent study by IDC Research showed that network operators plan to install about 55,000 so-called “hot spots” in the U.S. over the next five years, allowing Internet users access to the Web via wireless connections. Last year an estimated 4,200 hot spots were installed. Calabasas-based Tekelec, which has emerged as a leading wireless signaling equipment provider, foresaw rapid growth of cellular and wireless communications equipment in the early 1990s. The company, which was founded in 1979 as an equipment tester and measurer, began moving away from its core business in 1995 when cell telephones and wireless communications equipment began to take off in the U.S. “We were evolving into that area and it was a pretty opportune time to get into wireless,” said Tekelec Chief Financial Officer Paul Pucino. Today, the company has about 80 percent of the signaling market in the U.S. and despite a down year in 2002, it’s experiencing some encouraging sales patterns with sequential growth the last two quarters, though it is still down from year-ago numbers. Jeffrey Schlesinger, an analyst with UBS in New York, said the company could see some major growth in the coming months due to new legislation allowing cell phone users to keep their phone numbers if they switch carriers. “We believe that demand for signaling equipment in the U.S. will increase due to increased operator focus on network quality ahead of the implementation of number portability in November, continued growth in U.S. subscriber growth and minutes of use per subscriber,” Schlesinger wrote in his analyst report last month. MRV enters Chatsworth-based MRV Communications Inc. has also moved toward wireless by developing a line of optical products for laser-based wireless Internet. The company’s move into the space began two years ago when sales of its core optical module technology products began declining. In 2001, the company acquired Astroterra Corp. in San Diego for about $100 million and Jerusalem-based Jolt Ltd. for about $60 million, marking its entry into the market. “We made the choice two years ago through our acquisitions and so far It’s worked pretty well for us,” said Noam Lotan, MRV president and CEO. The two firms were acquired because of their positioning in the market, with Astroterra focusing on the domestic market while Jolt focused on the European markets. For MRV, the wireless sector has meant a small share of its overall revenue, making up about $8 million of its $252.5 million in total revenue last year. “It’s not a big market, but we’re beginning to see some results and we’re starting to see some penetration there,” Lotan said. The company, which saw its revenue plunge from $332.8 million in 2001 to $252.5 million last year, is hoping to grow its wireless segment in 2004. “We’re not giving any guidance on it, but we’re expecting some moderate growth there,” Lotan said.

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