Skip to main content

Frustrated with femtocells

iSuppli recently published a study contending that the next big thing in hi-tech is the femtocell. Two questions immediately come to mind: what the heck are femtocells and can an investor make money on them?

Background --

Femtocells are cellular base stations that improve indoor wireless coverage. Femtocell base stations improve 3G cellphone coverage inside buildings or homes — locations where wireless signals tend to be weak because of building materials blocking the signal or the site’s distance from a cell tower. A femtocell acts somewhat like a WiFi hotspot or a wireless router, providing access to the cell carrier's network for multiple devices within a building. With some carrier networks straining to keep up with the demands of increasing numbers of users surfing the web from their smartphones, femtocells are being looked at as a way to improve service without having to build as many expensive cell towers or spend so much to increase bandwidth.

The growth story --

iSuppli has this to say with respect to growth: femtocells are "headed toward critical mass among all major nodes of the wireless supply chain and will vault into explosive growth after reaching a decisive watershed this year."

They expect shipments to triple this year. They then expect shipments in 2011 to be 289% higher than 2010 and so on. The chart below shows the sharp ramp in shipments.

growth in femtocell shipments

Leading companies in the sector --

Among several carriers who are rolling out femtocells, there is Vodaphone PLC in the United Kingdom who already has femtocells in service. Most carriers are so big that adoption or non-adoption of femtocells would not be a primary reason to invest in one of these of companies.

So much for the customers. What about the producers of femtocells and the semiconductors used in them?

There is one clear leader in the field: picoChip. This company, also based in the U.K., pioneered the femtocell SoC (system on a chip) market and currently claims to be the only company with products qualified for major carriers' networks and shipping in volume. They say they have 10 carriers as customers that are now offering commercial service using picoChip integrated circuits and sixty more in trials. picoChip seems to the company that owns the space and, sadly for investors, they are a private company.

The growth potential in femtocells has not gone unnoticed by some of the major chip manufacturers. Qualcomm (QCOM) and Texas Instruments (TXN) are now looking at getting into the market. Again, these companies are both so big that femtocell components will barely move the needle when it comes to overall sales.

OK, we've looked at customers for femtocells and producers of femtocells and no great investments jump out at us. Well, there are still the test and measurement companies. According to iSuppli, the two leaders with respect to femtocells are AirHop Communications and Continuous Computing. Tough luck again, though, as both are private companies.

Conclusion --

Femtocells do seem poised for a real growth streak. For an investor, however, it's a frustrating situation. The best company in the sector is small, private and British. Even if they go public there's no guarantee their shares would be available to U.S. investors.

The best opportunity for an investor would be for a small U.S. company to acquire picoChip. A company where the boost from picoChip's sales would make a significant difference in the acquiring company's financial results. An interesting choice would be a company like SkyWorks (SWKS).

So for now, all we can do is keep an eye on the femtocell sector and see what happens. At least our cell service should improve while we wait for an opportunity to develop.

Comments

Popular posts from this blog

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street profess

Unlock Stock Market Profits - Key #4

This is the fourth article in a series of posts describing 10 tools to help you identify and evaluate good investing ideas. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) With this fourth post, we will continue another step along the path of finding stocks that seem to have some potential. The first post in the series discussed how to use unusual activity to identify investing ideas. The second post described how to use stock screeners. The third post described how to use lists of new highs and new lows. This post will focus on identifying social or business trends in order to find investing ideas. Information on new trends might turn up anywhere. In conversation with friends or business associates, in newspapers or magazines, on TV or though your work. The key is to be aware of trends and how they start, stop or change. We'll start by describing wh

Interactive Ads - Google one-ups Yahoo again

Google's ( GOOG ) press release describing the expansion of a beta program for what are being called Gadget Ads has again shown that Google is unparalleled at melding technology and advertising to benefit its bottom line. Gadget Ads are mini-web pages or "widgets" that can be embedded within publisher pages. I have written in the past on Yahoo's ( YHOO ) Smart Ads and how, by more precisely targeting site users and adjusting ad content accordingly, they provide a much desired evolution of the banner or display ad format. Though Smart Ads and Gadget Ads are not really the same, I think it is fair to say that Google has seen the challenge of Smart Ads and has chosen to leapfrog Yahoo by rolling out its own update to the display ad format. The evolution of the Gadget Ad -- One of the trends on the Internet over the last year or so involves software developers creating "widgets" which can be hosted within web pages and blogs. Widgets can be pretty much any