May 2, 2001 1:30 PM PDT

Can Metricom ricochet?

The maker of wireless Internet service Ricochet is switching its strategy in hopes of surviving past August, when the company expects its cash will run out.

John Cornwell, vice president of business development for Metricom, said this week the company has launched its first-ever marketing blitz to stoke interest in the service that lets people get Internet access at broadband speeds on wireless devices. A campaign is now under way in Atlanta and Dallas, two of the 15 cities where the service is offered.

The company is also pitching a new product called Ricochet Dial-Out Service, aimed at businesspeople on the move.

This is a shift in attitudes and strategies, Cornwell said. Since it launched the service in 2000, Metricom's philosophy has been to let the technology sell itself, and use the money that wasn't being spent on marketing to build out an infrastructure to one day serve three dozen U.S. cities.

Analysts say this is likely a last-ditch effort by Metricom. The company has lost a total of $500 million, money invested from the likes of Microsoft co-founder Paul Allen and WorldCom.

When it reported its fourth-quarter earnings, Metricom said it had only enough operating capital to last through June. But it somehow found some more cash to keep it going through August, according to a Securities and Exchange Commission filing last week.

The troubles come despite some analysts' beliefs that the work force is getting more mobile and can benefit from a mobile Web access at fast speeds.

"Whether involving document or spreadsheet preparation, sales order entry, or customer relationship management tools, far more work gets done with the mobile use of enterprise applications and data than with simple messaging or limited Web access," according to a report by industry consultants The Aberdeen Group.

The problem, say analysts like Mitch Norden of Riverside Asset Management, isn't the technology. Users of the Ricochet service can get speeds of up to 170 kpbs on their handheld devices, which is three times as fast as an ordinary dial-up connection used by wired Internet users.

Yet the company continues to post dismal subscriber numbers. At the end of the recently ended quarter, it had about 40,900 subscribers. That's "effectively zero customers," Stone and Younger analyst Ron Geise said.

While still dismal, the company's second-quarter numbers offered a slight sign of improvement.

Revenues for the quarter were up by about $1 million, hovering around the $3.5 million level. Revenue from an average user also rose, from $26 to $28 sequentially. The company also reported a loss of $3.16 per share, or $186 million, compared with a $3.71 per share loss in the last quarter.

The company was also lowering its "burn rate," or amount of cash it was spending. It spent about $211 million in the first quarter, about $54 million less than the fourth quarter of 2000.

Chief Executive Ralph Derrickson remains hopeful. "From a marketing standpoint, we are at the starting line," he said. "We have not yet begun to fight."

 

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