March 15, 2001 11:45 AM PST

In-car Net access ready to hit the road

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MobileAria is getting ready for its solo.

The company, which was formed in October with backing from handheld maker Palm and car parts giant Delphi, plans to release a beta of its voice-activated Internet service for the car by midyear. The service's formal launch is expected by year's end.

On Wednesday, the Mountain View, Calif.-based company named technology veteran Michael Orr as its first permanent CEO. The company is still finalizing which services it will offer first, but Orr said the company is looking at items such as e-mail, driving directions, restaurant and hotel referrals, news and stock quotes.

The company will initially go after yuppies and gadget lovers who already take their handhelds everywhere they go. "I think I represent the typical target," Orr said. "I have a Palm VII, but to use that and drive at the same time is risky."

MobileAria recruited Orr from his post as president of Santa Cruz Operation's Tarantella unit. Tarantella works with corporations to make their in-house software available over the Internet via a standard Web browser.

Initially, MobileAria's service will run in conjunction with Delphi's Mobile Productivity Center (MPC), a unit that attaches to the dashboard. In January, Delphi began selling the $499 MPC, which connects a cell phone and a Palm V handheld, allowing both devices to work together using voice commands.

Expectations for the in-car device have been high. However, concerns about the speed with which next-generation cell phone networks are being built and other issues have led analysts to project more modest growth for both device makers and service providers.

Deutsche Banc Alex Brown recently forecast that sales of the MPC could generate as much as $100 million in revenue this year. That forecast has since been cut.

"It now appears (the unit) could give them anywhere from $5 million to $20 million" in sales this year, said Ken Blaschke, an automotive components analyst at Deutsche Banc. "They are ramping up more slowly than we had originally thought."

Competition is also a concern, as MobileAria is far from the only company with its eye on the in-car electronics market.

In the fall, Sun Microsystems inked a deal with General Motors' OnStar unit to try to make Java technology the computing standard for the automotive industry. Microsoft has its Windows CE for Automotive operating system, as well as a Car.Net initiative aimed at creating a common language for cell phones, handhelds and dashboard computers.

IBM and Intel, too, have announced plans to collaborate on a standard for dashboard "telematics," a term for cellular and Internet services in vehicles such as navigation systems, roadside assistance and entertainment.

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Safer surfing while on the road
Michael Orr, CEO, MobileAria
Demand in overdrive?
Sales of telematics gear and services are expected to reach $2.3 billion this year and $14 billion by 2004, said Jonathan Lawrence, an analyst at Dain Rauscher Wessels.

"Eighty-five percent of people who own cell phones use them in the car," Lawrence said. "The demand is there."

Unlike other in-car systems, the Delphi unit uses gadgets that many car owners already own: cell phones and handheld computers. Such an approach, which creates an upgradeable system, is beginning to win favor with analysts and the car industry.

Lawrence said the Delphi unit makes sense but that the challenge will be for MobileAria to build a business around providing service for it.

"The biggest challenge for them is a business model," Lawrence said. "How do they make money?"

Orr said the company expects to charge varying rates for its services--between $10 and $40 per month--depending on added features. However, Orr said, a lot will depend on how much people are willing to pay for in-car service.

"Nobody knows for sure how much value is going to be ascribed to this," he said.

Stumbling blocks
Added delays of next-generation cell phone networks--needed to send and receive large amounts of data--could skew estimates for telematics revenue, Lawrence said.

One catalyst for voice-activated services could be the growing trend of cities banning people from making cell phone calls while driving.

"The government is beginning to scrutinize what goes on inside the car," Orr said.

Beyond that, Orr said, 30 percent of Palm owners admitted in a recent survey that they have tried to operate their handhelds while driving.

Still, Orr knows that the adoption of services like that of MobileAria will take place over several years.

"This year, I think we're talking pretty low numbers," Orr said.

Deutsche Banc's Blaschke said the key to strong sales of the Delphi unit, and therefore MobileAria, is to have more options as to which cell phones can be used. The initial unit only works with certain Ericsson phones.

Another way to increase sales will be to convince carmakers to include the unit as an option on new models. Blaschke said carmakers appear to be warming up to the idea of an add-on unit with removable parts rather than an Internet system that is a permanent part of the car.

"Many carmakers appear interested in coming up with a mobile solution, realizing that an embedded solution will become outdated through the 10-plus year life of the car," Blaschke said.

Meanwhile, Orr's first task once he settles in will be to arrange more funding for the company, which has its initial investments from partners Palm, Delphi and the Mayfield Fund. Orr said the company will also take on new partners. Over time, he added, the company would even consider developing services for handhelds that use Microsoft's rival Pocket PC operating system.

"We don't want to start running before we walk," Orr said.

 

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