Novatel Wireless has been on a roll. The San Diego-based company best known for making wireless modems that fit into the PC Card slots of laptops had an unexpected hit on its hands when it launched an external USB version of the product in North America last quarter.
Suddenly, the devices were being snapped up by the thousands, racking up more than $30 million in sales of the Novatel Ovation MCD3000 EV-DO modem in the first quarter alone. The sales, primarily made through U.S. carriers Sprint and Verizon, surprised watchers on Wall Street, who sent Novatel’s stock on an upward tear.
I recently caught up with Acting CEO and COO of Novatel Wireless Brad Weinert, and asked him why this wireless USB modem has become such a hit, and what new products Novatel is designing to capitalize on the Ovation’s success.
Global Tech News: Brad, when we met about two years ago, Novatel was just introducing its Ovation line of wireless broadband modems. Can you give me an update?
Weinert: When we last talked the Ovation was just starting to kick off with a European product, which we considered at the time to be a fixed line replacement product. It was a fairly multifaceted device with a LAN/WAN router gateway. We were also supplying a VOIP (voice over IP) option and really taking it through the European carriers to supplant or replace a landline carrier.
In North America however, the USB devices have caught on fire actually, and it’s been dramatic in terms of the revenue and the take-up rate. The novelty of the utility of having an external box with a USB port that you can plug into just about anything has certainly been very attractive in the North American markets.
Global Tech News: When you say “landline replacement,” are you talking about dial-up specifically, or are you including any type of broadband that’s reaching the home?
Weinert: I would be including DSL and ISDN in that. We’re getting typical speeds in North America on the product of about 800 kilobits per second on the downlink and 400kpbs on the uplink (using EV-DO Rev. A). So it’s at or equivalent to low-end, low-cost DSL and ISDN lines. It’s certainly not at cable modem speeds yet.
Global Tech News: Why would someone choose this over DSL, for instance?
Weinert. There are a lot of last-mile issues in certain areas, where you’ve got a fairly large contingent of users that can’t get traditional broadband or that have to pay premiums to do so. So carriers like Sprint and Verizon are selectively marketing it as a substitution for those customers, as well as marketing it as a mobile product. So it’s kind of a two-faceted approach.
In these communities, certain houses can get DSL and others can’t. So it’s never going to be a ubiquitous device that will supplant cable modems and things like that, but it is certainly giving us incremental business that’s outside of the classic realm of a mobile professional who needs the technology because they’re always on the move.
Global Tech News: Is the U.S. market becoming more receptive to these kinds of devices?
Weinert: Yes. It’s more willing to look at the options for a personal communications device that talks to all your other devices, it becomes your Internet backhaul on the back end, and on the front end it can talk via USB or Bluetooth to a VOIP phone, and it can talk over Wi-Fi to your laptop.
It’s moving more toward a model where your communication device is doing voice over IP, video, regular communications with a computer, and it’s not necessarily connected to any one device. So it’s really tethered by various technologies and can basically move around with you.
So it’s more of a personal communication router device than it is a box that sits right on the desk. That’s kind of the direction we’re heading right now.
Global Tech News: Since these devices are designed for mobility, does it really make sense to use it as your Internet connection for a home network?
Weinert: Absolutely. In fact one of the nice things is that, since the account is tied directly to the box, and it’s USB-based, you can use it at work for your small office, then unplug it and take it home with you, and have the same network connection when you get home, and it all appears on the same bill. It can sit on the desk, or plug right into a laptop, or a PDA for that matter.
Probably today that’s still the biggest application and to some degree, it has cannibalized some of the wireless PC card modem business, because it’s got more utility than a PC card, which is tied to a laptop and not as easily used with a desktop environment, or with a PDA, etc.
Global Tech News: I’ve been evaluating the Ovation MCD3000, and I’ve found it to be very useful for traveling, and as a backup to my home broadband connection, which is somewhat unpredictable and unreliable. But I haven’t found it easy to share that connection with other PCs on my wireless network.
Weinert: Exactly. That’s where we’re going with the next generation. If you add Wi-Fi to that device, then suddenly it’s very easy to do that. But right now, you need to plug it into a router and try to configure it, and it’s not very straightforward. And to some degree, the carriers have not really adapted to that business model.
There was some press recently that Verizon has redefined its quote “unlimited” usage plan and limited it to 5GB per month. That’s still a lot of data, but if you’re into gaming, or have kids that are, and you do a lot of uploading and downloading, you can exceed that fairly easily in a 30-day period. As these devices add more utility, they will be coupled with different rate plan “buckets.” There will be a true “unlimited” rate plan, but there will also be the cheaper rate plans which kind of limit you to the mobile environment versus the fixed environment.
So to some degree, the carriers have blocked (LAN capability) a little bit, but that is changing, and that it is certainly something that you will see over the next 12 to 18 months play out in a much bigger way as we come out with the second- and third- generation devices that have routing capabilities built into them, so you can share that connection across a multitude of platforms in your house.
Global Tech News: Will that change the form factor of the devices?
Weinert: It really won’t. Actually, they’re getting smaller. (Laughs.) The technology is getting down to the point where it’s very, very small. So you can actually do a lot more industrial design.
From our standpoint, our next-generation products are going to be much more — I hate to use the word sexy, but I’ll use it here. They’ll be more curved and retail-oriented devices that will be sold not only through the classical channels, but more at the retail level as well. In terms of form factor, it really can be anything you want to be at this point, because the actual technology inside it is about the size of a postage stamp, to be honest.
The only thing you have to be concerned with is the antenna design. Other than that it’s pretty much a free-for-all in design at this point.
Global Tech News: The form factor for an external device that the industry seems to have standardized around is the USB drive.
Weinert: Yes, exactly. So if you look at our next-generation products, think along those lines. It will be a very small, keychain-type device. The only challenge that you have is making sure you continue to have good antenna performance, because as you miniaturize, you have less space to play with, and to a certain degree, antennas are a function of how much space you give them to perform well.
Global Tech News: So how do you overcome that design limitation?
Weinert: Maybe with a flip-up lid, so it’s a split-in-half, clamshell-type design. Even with a tiny USB drive you can still do some things that are creative.
To be honest, the whole antenna technology and business is being driven quite a bit, too, to further miniaturize and get better gain out of less space “Smart” antennas and things like that are right on the horizon.
Getting good antenna performance is the biggest technology hurdle that we have to overcome, in terms of making it even smaller than it is today. Diversity is the key there. You actually have two antennas per band, and they each sample the airwaves at a little bit different angle, so you get to average the signal off of two antennas. So that’s the big biggest design challenge.
Global Tech News: So you could also have Wi-Fi integrated into a keychain-sized device?
Global Tech News: What’s your timeframe for introducing next-generation products?
Weinert: We’re going to have some next-generation products during the second half of this year. The ones that we’re talking about that are real radical designs I think you would see for a Christmas-type launch.
Global Tech News: Here in the United States, do you see this as primarily something that appeals to people who don’t have access to fixed line broadband, or is there also demand from people who are looking for something to augment their existing broadband access?
Weinert: The majority of the business is still the traditional (mobile) use. It’s just that the form factor has changed. For example, Apple Computer is a very big proponent of this because they don’t have PC card support. PDAs and ultramobile PCs, although their numbers are relatively low, are also a natural fit for this product because it uses USB, and typically they don’t have PC card slots.
Global Tech News: Do you think additional carriers in the United States will start selling the product?
Weinert: Right now, I don’t. I expect additional uptake with the carriers we have, but I expect that Sprint, Verizon and Cingular are going to lead the charge. However, we are launching with new carriers in Canada, in Latin America and in smaller countries throughout Europe, as well.
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