WiMAX: Vendors facing razor-thin margins and device makers are waiting it out

Earlier this week, Harris bought Telsima [1], which billed itself as a competitive WiMAX vendor for emerging markets, for $12 million. The price tag has been talked about because the vendor raised $75 million from venture capital firms, including Intel Capital, and had $25 million in debt.

Adlane Fellah, CEO and founder of research firm Maravedis said the low price tag highlights the unfortunate realities of a startup like Telsima going after a market where vendors are competing ferociously. "More than 25 vendors are chasing a business with razor-thin margins, especially in developing countries highly sensitive to technology pricing like India, where operators enjoy single digit ARPUs," he said. "Telsima was a relatively small player in the global WiMAX market with only 38,500 CPEs deployed mainly in India with Tata and Reliance, a market with great potential."

So while the existing WiMAX vendors are trying to survive on razer-thin margins because a lot of the RFPs are in developing countries right now, the world's largest mobile handset maker is quite wishy-washy about where it stands with making WiMAX devices. Recently, Nokia ended production of the N810 WiMAX tablet, a Nokia executive dismissed WiMAX as a niche play during a conference [2] but then the vendor turned around and said its decision to end production of the N810 WiMAX tablet "does not apply to other WiMAX business development efforts that Nokia is involved in."

I have a feeling Nokia doesn't want to totally abandon WiMAX until it sees whether Clearwire makes some significant headway in the market. Clearwire says it is on track to deploy service to some 120 million pops by the end of 2010. WiMAX seems to be facing that chicken-and-egg problem. There is a lack of compelling devices, which some say are hindering adoption, but device vendors want to wait until they see a viable market for the technology before they invest in it. Read all about WiMAX devices in our WiMAX device Special Report [3].--Lynnette [4]