Shares in the Los Gatos, Calif.-based wireless data firm are trading in the 80s today, after hovering in the 20s as recently as early October. Company shares traded in the single-digits in January, but have peaked as high as 104.5 in the past 52 weeks.
The stock has made strong gains as investors have cheered Metricom's new mobile strategy. The company plans to release faster, more reliable wireless access so business people can tap company networks on the go.
The new strategy has won some serious backing: MCI WorldCom and Vulcan Ventures, the investment arm of Microsoft cofounder Paul Allen, have grabbed a larger stake in the wireless firm, analysts said.
The firm is well positioned to ride the current wave in wireless technology. The wireless data and Internet access market is poised to explode over the next few years as the demand for mobile communications grows. Firms like Qualcomm, Motorola, Nokia and others have seen their stocks jump to new highs as investors see gold in the growing wireless market.
Metricom builds and maintains a collection of metropolitan wireless networks, allowing business users to connect their laptops to the Internet or a corporate network while traveling in major cities nationwide.
The company uses small wireless transmitters placed on top of city streetlights to bounce signals between a network and wireless PC modems. The modems, typically installed in the PC card slot on a laptop computer, allow customers to access the Internet or transfer files between their computer and a corporate network, just as they would at the office.
"The promise is to replicate your desktop in the field," Billy Bowden, an equities analyst for Amerifirst Securities, said. "This is not just sports scores and skinny messages."
Metricom executives say their plans for faster mobile access could catch competitors off guard. Metricom plans to launch a network capable of 128 kilobits per second (kbps) in a dozen U.S. markets next summer. Current wireless modems only offer speeds up to 28.8 kbps.
Analysts say the speed jump is enough to push Metricom ahead of the wireless pack. Competitor Qualcomm is now in trials of its own high data rate (HDR) technology. Other carriers and equipment makers, meanwhile, still are fighting over next-generation wireless data standards known as "3G."
Qualcomm's HDR technology is not expected to be available commercially until the second quarter of 2001, while many analysts doubt 3G technologies will be available until at least 2002, if not much later.
"[Metricom will] be first to market with high bandwidth. I think they'll have at least a year and possibly a two-year head start," Forrester Research analyst Mark Zohar said.
"The stock's been on just a monumental run," Bowden said, adding that he has a "buy" rating on Metricom stock. "I think this could be another Qualcomm."
Metricom aims to reach 100 million U.S. homes in more than 40 cities by the end of 2001. The company claims just 30,000 customers today, but company executives hope to push their product before faster technologies find their way to market.
"There's clearly a window of opportunity that we need to get through," said John Wernke, senior vice president of marketing and sales at Metricom.
Founded in 1985, Metricom built wireless transmitters designed to automatically read electric and gas utility meters. The company later used the technology to develop a wireless modem service, but its early products still are being used by nearly 200 public utility companies nationwide.
The company went public in 1992, yet Metricom stock has languished in the single digits in recent years. Although its original Ricochet wireless modem technology was seen as revolutionary when it was first introduced in 1995, the service speed was limited to 28.8 kbps and was introduced in only three cities: Washington, D.C., San Francisco and Seattle.
Metricom executives now believe their previous strategy to design the network, build the modems, provide the Net access, and sell the service spread the company too thin.
"The company was kind of failing financially because they didn't really know how to market the Ricochet modem," Bowden said. "They weren't great salesmen, they were techies."
Metricom has shed itself of the ISP business and its manufacturing arm to focus on developing a new, faster wireless data network. The company also plans to sell its service wholesale, allowing wireless carriers and other communications companies to resell the Ricochet brand.
"We decided we want to be the premier company at designing, provisioning, and maintaining wireless data networks, and not worry about the rest of it," Wernke said.
The strategic moves helped garner a larger investment from Vulcan Ventures and MCI WorldCom. Vulcan was already an investor, but after closing another round of funding in which both Vulcan and MCI contributed $300 million, Vulcan owns a 49 percent minority controlling stake. MCI owns 38 percent.
Analysts say MCI WorldCom's involvement is a huge boon for Metricom.
"MCI had been stalking these guys for months, when MCI didn't really have a wireless strategy," Bowden said. "Now they become sort of a master fit for MCI."
Forrester's Zohar agreed. "With the Sprint-MCI merger, I think that Metricom becomes the business wireless play for the combined entity."