BRUSSELS -(Dow Jones)- Shares in Belgian wireless technology company Option lost a quarter of their market value Thursday after Finnish technology giant Nokia said it had developed a rival to its flagship product.
The data card maker, which had EUR198.6 million in revenue in 2005, compared with Nokia’s EUR34 billion, has had a head start in the development of state-of-the-art high-speed Internet access cards that can be embedded inside laptops.
But Nokia’s announcement that it has developed its own embedded card and will team up with Intel to produce it for laptop makers has roused fears of a squeeze on Option’s market share and profits.
In a double blow, Japan’s biggest telecom operator Docomo also announced a deal with US mobile phone maker Motorola to market Motorola’s high-speed Internet access cards. Japan is the world’s largest market for third-generation wireless services, which allows e-mail access, Internet browsing and video streaming.
“For several months now, Option has been hinting at the potential that Japan represents,” said KBC Securities analyst Nico Melsens who has a buy rating on Option.
There are other Japanese operators such as SoftBank/Vodafone KK and eMobile, but these are smaller and offer less growth opportunities, he said. Option has been a hot stock on the Belgian market, doubling its share price over the last year as demand soars for its market-leading products.
Earlier this year it produced the world’s first data card that integrates two leading 3.5G Internet access technologies, HSDPA, or High-Speed Downlink Packet Access and WLAN, or Wireless Local Area Networks which use radio waves instead of cable to connect to the Internet.
Bank Degroof analyst Siddy Jobe said it was too soon to say how badly the company would be hit by the Nokia competition.
This year, most of Option’s revenue is expected to come from data cards that plug in to laptops when the user requires wireless Internet or e-mail access, with only 6% coming from embedded cards.
In the future, however, the embedded cards market is expected to take over as the mainstream product, he said.
“So far we didn’t expect players like Nokia to enter this market,” Jobe said. “It is a new market with high-growth figures and very good margins.”
Increased competition would eat into market share and increase pricing pressure and could hurt Option’s business model in the longer term, he added.
In its favor, Option has a 20-year head start on Nokia in the technology and is purely focused in the datacard market with several world firsts to its name. And Nokia still needs to show it can deliver a strong alternative.
If it can’t, it could always decide to buy the technology in instead, and Option could then top the list of targets, analysts said.
Source- http://www.cellular-news.com
Posted by wirelessfed 