Bluetooth Bluetooth wireless technology is based on the design and development of in-vehicle wireless hands-free system. Main function in normal driving with the phone connection using Bluetooth technology for hands-free calls, has reached the hands free, aim to reduce traffic accident risks.
CONFIDENTIAL MOBILE RADIO LTD BOARD PAPER BLUETOOTH BACKGROUND AND OPPORTUNITIES Written by: Geoff Devin S/N: 9913107846 Date: May 27, 2001 1 Executive Summary 1.1 An opportunity has been identified for Mobile Radio Ltd (MRL) to become involved in the commercialisation of Bluetooth as an extension of the current manufacturing activities. It is expected that the project will be cash flow positive after 2 years and because of the high profit margins expected, it will provide a Return on Assets employed of 20% after 3 years. This exceeds our hurdle rate of 15% for new investments. Because of our borrowings, a Return on Equity of 25% after 3 years is anticipated based on the current Debt/Equity ratio. 1.2 Bluetooth is the code name for the rapidly emerging global specification for wireless connectivity for mobile PCs, handheld devices, wireless phones, headsets, other wearable devices and computer peripherals including printers, in addition to human interface devices such as data pads and mice (Ellis2000, 1). A Bluetooth Special Interest Group (SIG) comprising over 2000 vendors has been developed. In mid May 2001 there were 162 approved products on the SIG Web site, but only 37 were currently available (Thomas 2001,1). 1.3 As expected, estimates vary, but indications suggest the initial cost of Bluetooth compliant radios embedded into devices will be $30 (USD) per unit, but ultimately, the additional unit cost due to the Bluetooth radio will be $10 (USD). The Bluetooth specification calls for power consumption of 30 micro amps in the standby mode and 8 – 30 milli amps in transmit mode (Ellis 2000, 2). 1.4 To date there has been much hype about the benefits of Bluetooth and the rate of development of the technology. Research has however identified problems with price, interference and power consumption, this means that commercial products may get to the market later than originally scheduled and still be 12 months away (Howard and Grant 2001, 1 and Ng 2001,1). 1.5 Micromedical Industries Limited (MMD) is a Gold Coast based company involved in clinical trials of patented artificial hearts and had product sales of $2.27 million during the 2000 financial year of heart monitoring equipment (ECG) sold primarily to international airlines (Micromedical Annual Report, 3). They have recently patented a Bluetooth application to allow the ECG to be connected to a mobile phone, Personal Computer (PC) or Personal Digital Assistant (PDA) to minimise costs and maximise patient convenience and mobility (Kaye 2001, 1). Voxson is a Brisbane based supplier of mobile phones which also has patent protection in Bluetooth applications. They were scheduled to release the first Bluetooth products during 2000 (Voxson 1999, 50), but production delays have stopped this milestone being achieved. 1.6 The Bluetooth Congress 2001 will be held in Monaco from 5 – 8 June 2001. 1.7 It is recommended that the following actions be taken immediately. • Join the SIG. • Contact MMD to offer MRL services to manufacture the Bluetooth hardware and appropriate software for their ECG equipment and to offer MRL as a strategic partner in their manufacture of electronic equipment. • Send an MRL representative to the Congress. 1.8 Become involved in the Link Controller niche market as this is a component of the Bluetooth hardware as explained in more detail in 2.6. 1.9 Appoint a person into a full time role of Bluetooth Group Leader and second existing employees into a small multidiscipline group to identify and develop the Bluetooth opportunities. The charter of this group should be to propose a project (or a number of projects), for Board approval by the August Board meeting, which are projected to meet the MRL investment hurdle rate. 2 What is Bluetooth 2.1 With today's society becoming increasingly mobile (see figure), the need for wireless communication is paramount. With the push by Telcos to make the mobile phone indispensable to everyday life, it is envisioned that the mobile phone will be used for almost all electronic transactions from unlocking the family car, ordering a coke from a vending machine (currently happening at railway stations in Sydney), and paying bills. Bluetooth is set to become the adopted short range, medium speed wireless communications link. Bluetooth is an open specification technology set to improve the data and voice interconnectivity for end-users using spread spectrum techniques. The advantage that Bluetooth has over competing standards is that Bluetooth chips can be made very small, low power consuming and cheap. Figure 1: Predicted Mobile Phone Usage, (Hodgson and Rabin 2000, 1) 2.2 A network of up to eight Bluetooth enabled devices form a Piconet (figure 2) if they are within 10m of each other. Initially each user will set up a Piconet of all their Bluetooth enabled devices. The devices will identify each other by using a MAC address (this is an address provided by the manufacturer of the device) and a Personal Identification Number (assigned by the user). Devices that belong to the same Piconet will acknowledge, identify each other and communicate instantly. When a Bluetooth device that is not part of the Piconet comes into range, the user will be prompted to permit a networking session, the user can deny this request. To increase the operating distance, two or more Piconets can link together to form what is termed a Scatternet (figure 3). Figure 2: Piconet, (Hodgson and Rabin 2000, 8) Figure 3: Scatternet, (Hodgson and Rabin 2000, 8) 2.3 It operates in the globally available 2.45 GHz band and will allow the proprietary cables connecting digital devices to be replaced with a universal short range radio link (Voxson 1999, 49). To provide good security and help eliminate Radio Frequency Interference (RFI), the frequency can hop in 1 MHz increments from 2.402 to 2.48GHz this is called Frequency-Hopping Spread Spectrum (FHSS). A diagrammatic representation of frequency hopping is shown in figure 1. The link range is .1 to 10 meters (class 3 devices) and it operates at power levels of up to 100mW. The range can be extended by incorporating an amplifier to increase the transmit power (100m for class 1 devices). Figure 4: Frequency Hopping, (Denton 2000, 3) 2.4 Bluetooth can transfer data at rates from 721 Kilobytes per second (Kbps) to about 1 Megabyte per second (Mbps), this is about three to eight times the average speed of parallel and serial ports, respectively (Denton 2000,5). 2.5 The Bluetooth specification provides 3 security codes: non-secure, service- level and link-level security. Link-level security provides applications with knowledge of “who” is at the other end of the link and provides authentication, authorisation and encryption services (128 bit Public Key Encryption). 2.6 The Link Controller (LC) is the hardware unit that enables the physical RF link between Bluetooth devices and implements protocols to allow the host device to use the Bluetooth connection (Steck 2000, 2-4). The radio manufacturing expertise of MRL could also be used in this area and not solely the portable devices mentioned in 1.7. Bluetooth, because of its low cost and range is very suitable for the majority of home applications and it is far cheaper than 802.11b wireless LAN (also called Wi-Fi) which is now widely used in the US (Broersma 2001, 1). In Australia, Qantas has now rolled out WI-Fi in the Qantas club lounges (Brown 2001, 42). The niche opportunity identified for MRL is to become involved in the manufacture of LCs for home automation as this is expected to become a rapidly growing market in Australia. 2.7 A Swedish software maker Pocit Labs says it has created the world’s first Napster-like file-swapping software for mobile devices which communicate using Bluetooth technology. This software called BlueTalk will make its debut at the Bluetooth Congress 2001 mentioned in 1.6 above. This software will allow up to 54 people at a time to trade files, play the same games, or use up to 50 other software applications on wireless devices. This is called peer-to- peer (P2P) computing (Chamy 2001,1). 3 Investment Opportunities 3.1 It is expected that high profit margins will be available to companies which enter the niche market of Bluetooth. The fast way to enter the market would be to enter into an alliance with a company that has a presence in this market. Two Australian public listed companies, Voxson and Micromedical have been identified as having a commercial interest in Bluetooth. Voxson have missed many of the milestones listed in their prospectus and have therefore been seen by the market as an unreliable “tech stock”. Accordingly, the share price has decreased to $.30 after listing at $2.70 eighteen months ago. Micromedical on the other hand is now trading near their all time high because of credibility in the market. Since MRL needs to be seen as a winner, these points must be considered in any strategic alliance considered by MRL. It is expected that many other Australian companies have a commercial interest in Bluetooth, but they have not been identified in the research done by the author up to this date. 3.2 As identified in 2.2 above, the short range and low cost of Bluetooth makes it very applicable to home use. Home automation up to now has entailed hard wiring to connect up the security system, sprinkling system and lighting controls. This makes the home automation installation only applicable to new houses and even then installation is expensive. It is anticipated that Bluetooth will change this situation even though it has not been mentioned in any of the research uncovered in the project to date. Bluetooth will also allow for a much neater home office with minimal numbers of unsightly cables associated with the computer and printer. The opportunity for MRL is to produce the LC for Bluetooth installations either as a stand alone unit, or to include it in some device used in all modern Australian homes for example the home refrigerator or personal computer (PC). Intel has already produced a Universal Serial Bus (USB) dongle which will allow any device with a USB port to be capable of Bluetooth transmission and reception (most computers today have a USB port). Figure 5: Intel’s USB dongle (Hodgson and Rabin 2000, 5) 3.3 Other niche markets may include wireless record keeping in hospitals and interfacing with instrumentation in the mining and manufacturing industries. 4 MRL Strengths 4.1 MRL have expertise in manufacture of miniature electronics which is compatible with the skills needed for manufacture of Bluetooth hardware. 4.2 It is also anticipated that the existing manufacturing equipment will be appropriate for Bluechip manufacture, but it is estimated that a maximum of 100,000 components can be manufactured annually in addition to current contracted commitments. 5 MRL Weaknesses 5.1 MRL have very limited expertise in the design of electronic circuits as all recent work has been done on contract to a design developed by others. 5.2 Bluetooth chipsets are now available from a number of manufacturers and Cambridge Silicon Radio has recently shipped their one millionth chip (Broersma 2001, 1). This should minimise the design work required by MRL, but it is still expected that some design work will need to be contracted out, or alternatively specialists employed to cover this field. 6 Project Threats 6.1 Given the rapid development of the technology, it is anticipated that the major risks are associated with the likelihood of the current technology being updated and therefore the skills and inventory become obsolete. 6.2 It is however anticipated that this risk can be managed effectively by becoming a member of the Bluetooth SIG recommended in 1.2. 7 Project Recommendations 7.1 Send an MRL representative to the Bluetooth Congress 2001, which will be held in Monaco from 5 – 8 June 2001. 7.2 Join the SIG. 7.3 Contact MMD to offer MRL services to manufacture the Bluetooth hardware and appropriate software for their ECG equipment and to offer MRL as a strategic partner in their manufacture of electronic equipment. 7.4 Become involved in the Link Controller niche market. Additional research is required to establish how this is best achieved, but it is expected this is likely to be achieved via a strategic alliance with an existing household equipment manufacturer. 7.5 Appoint a person into a full time role of Bluetooth Group Leader and second existing employees into a small multidiscipline group to identify and develop the Bluetooth opportunities. The charter of this group should be to propose a project (or a number of projects), for Board approval by the August Board meeting, which are projected to meet the MRL investment hurdle rate. The tight schedule is necessary because the opportunities are developing rapidly and the niche markets considered will only offer excess financial returns for short time periods. References Broersma, M. 2001, “Bluetooth to be big by Christmas”, ZDNET News Australia, April 13, 2001. Brown, P. 2001, “3G spectrum could prove waste of space”, The Australian, May 23, 2001. Charny, B. 2001, “P2P gets mobile, taps Bluetooth wireless tech”, CNET News.com, March 6, 2001. Cuthbertson, I. 2001, “Wireless World”, The Australian Magazine, April 28 – 29, 2001. Denton, A. 2000, “Bluetooth Technology Background”, www.xircom.com, March 2000. Ellis, S. 2000, “Bluetooth technology: connected PCs to go”, developer.intel.com, 2000. Hodgson, D & Rabin, J. 2000, “The Oncoming Bluetooth Juggernaut”, Dundee Securities Corporation, November 9, 2000. Howoth , R & Grant, P. 2001, “Early Bluetooth lacks bite”, ZDNET News UK, January 8, 2001. Kaye, B. 2001, “Bluetooth arrests heart problems”, ZDNET News Australia, January 24, 2001. Micromedical Industries Limited 2000, Annual Report 2000 Ng, P. 2001, “Consumer or enterprise potential realised?”, 2001 Wuzap.org, May 22, 2001. Steck, K. 2000, “Bluetooth wireless technology”, Anywhereyougo.com, March 22, 2000. Thomas, A. 2001, “Has bluetooth left it too late?”, ZDNET News Australia, May 15, 2001. Voxson Limited Prospectus 1999, “Initial Public Share Offer”, November 9, 1999.
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