Riding the Waves

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A little more than a year ago, the market for municipal wireless Internet services was booming, fueling growth for networking equipment companies like Strix Systems Inc.


But seemingly almost as soon as it took off, the market for citywide Wi-Fi changed course to an ad-supported model requiring hardware suppliers to bear all their own upfront costs.

Many small companies took a hit, but unlike its competitors in the topsy-turvy market, Strix has thrived and even become a leader through a business model based on innovation and the aggressive pursuit of new markets as far away as rural Africa.

“This is very exciting,” said Gordon Almquist, chief financial officer of the company. “We’re in the nascent stages still of this market, but the market is expected to grow.”

Wireless networking involves the installation of devices that transmit and receive wireless voice, video and data signals that can be accessed within a limited radius by home and office computers. However, the devices can be installed on multiple power poles, for example, to create a so-called “mesh” network.

Strix, which ranked No. 2 on the Business Journal’s 2006 list of the county’s fastest growing companies, has held its ground by pursuing new opportunities overseas even as it turned away from the U.S. municipal market.

Currently, Strix networking products including radio nodes and antennas are being deployed in 42 countries and six island nations in sub-Saharan Africa through a partnership with Sameer Group, a Nairobi-based investment company.

Under the deal, one of Sameer’s information technology subsidiaries will use Strix products to provide wireless Internet access to millions of customers across the continent.

Other places where Strix products can be found include India, Greece, Finland and, in preparation for the upcoming summer Olympic games, Beijing.

The Chinese capital’s Public Security Bureau is installing Strix products across the city to support and upgrade the public safety network and allow security personnel to efficiently transmit voice, video and data on a high-speed network.

Several independent studies have shown Strix products to be among the fastest and result in the best quality of voice and video transfer. What’s more, Strix’s low-cost system can accommodate up to 100 nodes each supporting more than 700 users from a single so-called “Internet backhaul location.”

Daryl Schoolar, a senior analyst with In-Stat, a Scottsdale, Ariz. communications industry research firm, said foreign contracts are often smaller than those for municipal Wi-Fi, but they provide great potential for companies that are looking for largely untapped markets.

“These deployments don’t have the same large shipments as citywide Wi-Fi but the overseas market is important,” he said. “That’s an important area for the mesh vendors to continue to exploit.”


Wi-Fi rising

Strix is privately held and does not disclose its revenue, but a 2007 survey of wireless mesh equipment makers by In-Stat listed Strix as the top company in terms of estimated revenue and No. 2 in the number of units shipped. In-Stat did not release specific figures, but said the company has roughly a fifth of the market share in a $240 million industry.

Contributing to the business, both domestically and abroad, has been the increasing popularity of devices other than computers with Internet connectivity.

“One thing that’s driving this is the proliferation of Wi-Fi client devices, including iPhones, PDAs, dual-mode cellular phones, laptops, video surveillance cameras all with the need for connectivity,” Almquist said.

Just over seven years old, Strix didn’t make much of a splash until municipal Wi-Fi took off in 2003 and 2004.

The company designs and manufactures a variety of wireless networking products. For municipal Wi-Fi networks, the company makes broadband Internet nodes, which retail for several thousand dollars each and provide Internet access to a limited geographic area. The capacity of each node varies depending on bandwidth, but a typical device can support more than 500 users.

The number of cities signing up for municipal Wi-Fi has exploded in the past few years. More than 250 cities across the country have deployed citywide Internet networks and the market is expected to surpass half a billion dollars by 2010.

Initially, it seemed that municipal Wi-Fi would be the main source of revenue for Strix. But recently, the business model began to change from a subscription-based service to one in which the service provider makes money solely from Internet advertising. A number of startups jumped in the game, offering cities the attractive option of free or low-cost Internet access. Strix was disinclined to pursue it.

“It was a very impractical model,” said Kirby Russell, director of product marketing for Strix. “The service provider would install everything for free and they would get paid through advertising. But over the years we have found that it doesn’t pay back. Not all of us can survive by giving our products away.”

Still, the company anticipates tremendous growth in the coming years as the international markets continue to grow. For the first time in 2008, the company expects about half of its revenues to come from overseas markets.

ABI Research, an Oyster Bay, N.Y.-based organization that analyzes the technology industry, expects the global market for wireless mesh products to reach $1.3 billion by 2009.

The company has drawn investors including Santa Monica-based venture capital firm Palomar Ventures Management LLC since its early years. Bob Obuch, a partner with Palomar, said Strix is still finding opportunities domestically, even as the municipal Wi-Fi market has cooled. “Like any early-stage company, the products mature and change with the market,” he said.

In addition to deals signed with rail lines and government agencies, Strix recently inked a contract with Underwood, N.D.-based Falkirk Mining Co. Inc. to build a wireless network that could aid its coal mining operations.

Darin Jacobson, information systems technician for the company, said the network has been very useful for tracking vehicle locations and other information on their 60-square-mile mine.

“There’s more throughput for sure, a lot more ease of manageability,” he said. “The interface of it is quite a bit better than other systems we’ve had in the past.”

Strix Systems Inc.

Year Founded: 2000

Core Business: Wireless mesh

networking products

Employees in 2007: 75

Employees in 2008: 60

Goal: Become a global leader in

wireless networking

Driving Force: Increasing demand for

high-quality, high-speed networking

capabilities for public and private use

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