Ups and downs in wireless Net access

Metricom is feeling a cash crunch, while Omnisky glows brighter than a Texas barbecue with predictions that it will break even a year ahead of schedule.

Ben Charny Staff Writer, CNET News.com
Ben Charny
covers Net telephony and the cellular industry.
Ben Charny
3 min read
It was a tale of two mobile modems.

One?-Metricom, the makers of Ricochet's mobile service?-said Thursday it needs more cash or it'll be all-but-dead by June. The other--Omnisky-?was able to spell a happier tale of $120 million in the bank and predictions that it will break even a year ahead of schedule.

The latest tandem of announcements may mean that companies hoping to build their own wireless networks may meet the same fate as Metricom, which had a huge cash burn rate from construction costs in 25 cities. Omnisky, on the other hand, has partnered with Internet service providers to deliver its service, rather than dirty its hands with network construction.

"(The divergent earnings reports) says it costs a lot of money to build out a system, and then the service has to be priced right," said Gartner Senior Analyst Tole Hart.

Other analysts think this is yet another set of mixed signals from wireless players, part of an industry that has become a specialist in the up, down and all around.

Wireless players such as WAP (wireless application protocol) browser king Openwave Systems are reporting record earnings. But at the same time, cell phone makers say they expect weaker sales, and naysayers wonder when the United States will embrace the mobile Web.

In a counter-punch of analyst calls Thursday, Metricom, a mobile Internet service provider known for its Ricochet modem, said it may have to cease operations in June because of a cash crunch. Simultaneously, mobile paging and ISP Omnisky crowed about its good fortune.

Glowing executives from Omnisky predicted that it will be in the black by the fourth quarter of 2002, a year earlier than expected.

Its fourth-quarter revenues will likely meet analyst expectations, coming in somewhere between $4 million and $4.6 million. The company also will be losing less money in the quarter, between 60 cents a share and 63 cents a share, or about 10 cents less than expected.

Since May, the company saw subscriber totals jump six times, to about 34,000, analysts were told.

Omnisky is planning to offer even more services this year, including a corporate e-mail service sometime before the end of April.

America Online customers will also be getting their own version of Omnisky's mobile e-mail and Internet services by the end of June. The two companies signed an agreement last September.

Much of the good news stems from the company cutting corners, as well as a recent 40 percent reduction in how much it pays to companies like Verizon Communications, A&T, Cingular and AllTel Communications for air time, Omnisky CEO Patrick McVeigh told analysts on Thursday.

Just as Omnisky was crowing, Metricom was groaning.

Executives told a gathering of analysts that the company has just enough cash to keep it going through the second quarter, and it's got its hands out for investments.

"Prudence dictates we have to dramatically slow down deployment," said Metricom CEO Timothy Dreisbach. "If we are unable to obtain the funding, we won't have sufficient resources to continue operations."

Its numbers were equally dismal. After the company reported a fourth quarter loss of $114 million Thursday--almost double the loss of the same quarter a year ago--shares plunged 44 percent to close at $5.81. Earlier, shares touched a new 52-week low of $5.

Revenues were also cut in half, from $4.9 million in the last quarter of 1999 to $2.4 million during the just concluded fourth quarter.