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A start-up called Ozmo Devices is taking on the popular short-range wireless technology Bluetooth with a new flavor of Wi-Fi.

On Monday, the Bay Area start-up, which has raised $12.5 million since 2005, officially introduced a new low-powered Wi-Fi chip and software that will allow device makers to connect accessories like headsets, computer mice, speakers, and keyboards to laptops, mobile phones, and other consumer electronics using Wi-Fi.

For laptop and device manufacturers, using Ozmo's software means not having to include a separate Bluetooth radio in these devices to connect peripherals. With the Ozmo software installed on their devices, these manufacturers can simply use the Wi-Fi chips that already exist in laptops, gaming consoles, mobile handsets, and other devices.

(Credit: Ozmo Devices)

Wi-Fi is already integrated into almost every laptop that hits the market today. And as more mobile handsets such as Apple's iPhone and music devices like Microsoft's Zune come with embedded Wi-Fi, the market for Wi-Fi is growing. It's these mobile devices that Ozmo executives believe offer the biggest opportunity for their company. Unlike Bluetooth, which only provides short-range connectivity between peripherals and devices, Wi-Fi is used primarily to provide Internet connectivity.

"Manufacturers are putting Wi-Fi in devices because they want their devices to connect to the Internet," said Roel Peeters, co-founder and vice president of marketing and business development for Ozmo. "And now we're giving them the ability to use that same technology to also connect to low-powered peripherals, like headsets and speakers, as an added bonus."

In order for the Ozmo technology to work, device makers will have to embed Ozmo's software. And peripheral makers will have to integrate the Ozmo chip, which includes a subset of the Wi-Fi standard, into their devices. While it will certainly take time to seed the market with its technology, the small start-up is already off to a good start. Intel, the world's largest producer of Wi-Fi chips, has invested in Ozmo through its Intel Capital venture capital arm, and it plans to include the Ozmo software in its Centrino notebooks later this year. Intel has said the new technology will allow a single radio on a laptop to connect to the Internet while also connecting up to eight different peripheral devices.

While Ozmo executives claim there is enough opportunity for Wi-Fi and Bluetooth to co-exist, the fact is that the Ozmo technology is essentially a replacement for Bluetooth.

"We don't have to displace Bluetooth for us to be successful," Peeters said. "But we think of Bluetooth as a legacy technology. Ultimately, consumers will choose which experience they prefer. But I think we have strong differentiators."

For example, Peeters explained that Ozmo's technology offers faster data transfers and better battery life on the actual peripherals, such as headsets, than Bluetooth offers. And because security is already built into Wi-Fi standards such as 802.11n, Ozmo's Wi-Fi technology is also more secure than Bluetooth, Peeters said.

While it's unlikely that Bluetooth will disappear overnight, Wi-Fi will certainly give the technology a run for its money, especially if the performance and cost benefits live up to Ozmo's claims.