Femtocell Startup Pockets $25M

Home base station startup Ubiquisys Ltd. has pocketed a $25 million second round of funding as it inches closer to mass production of its 3G femtocell product. (See Ubiquisys Gets $25M.)

The new round, which takes the startup's total funding to $37 million, comes from its original investors -- Accel Partners , Atlas Venture , and Advent Ventures -- and from Google (Nasdaq: GOOG). (See UbiquiSys Gets $12M.)

Google's involvement is definitely intriguing. For more on that story, read Google Invests in 3G Startup.

As for UbiquiSys, the new money comes as the company gears up for what promises to be an explosive few years in the market for femtocells, which are small, low-power base stations that sit in the home or office, feeding calls and data sessions back to mobile operators' core networks via broadband connections.

Major mobile operators are openly expressing interest in, and trialing, femtocell technology, and analysts at ABI Research expect 2008 to be the start of mass deployments, with shipments expect to hit 1 million units from just 50,000 this year. Ovum Ltd. , meanwhile, expects the home base station market to be worth $1.4 billion in 2010. (See Vodafone RFP Fuels Femtocells, FT Preps Femtocell RFP, Is AT&T Putting Out Femto Feelers?, and Softbank Trials Femtocell.)

UbiquiSys CEO Chris Gilbert says the money will be used for "normal running-the-company stuff" as it gears up for mass production of its femtocell product, the ZoneGate.

He says he has "just taken delivery of the production boards for our first 3G devices, so we are about to start coming out with the actual product. We're moving to the point where this is very real. We have done about a quarter of the engineering we want to do, and we have about a month of software stuff still to do," says the CEO, who has been busy building industry partnerships and trialing his technology in Japan during the past six months. (See Ubiquisys, Softbank Demo , Netgear, Ubiquisys Team, ABI Rates UbiquiSys, UbiquiSys, Kineto Interoperate, NEC, Ubiquisys Team, UbiquiSys, Netopia Team, and Kineto, Ubiquisys Team.)

So does he have orders to fill? "I can't talk about whether we have orders, but I can say we're under pressure time-wise to deliver product. We will be ready in the fourth quarter to be involved in customer trials. We're just about ready to deploy."

The CEO predicts that, by the second quarter of 2008, "we should be shipping in serious quantities, hundreds of thousands of units. It's being built like a mobile phone, so, in production terms, rolling off a few hundred thousand units" is not like trying to mass-produce network equipment.

Gilbert adds, though, that the timing of the ramp-up will be "determined by the marketing plans of the service providers," which, he says, will also determine the price points of the femtocells.

Gilbert notes Vodafone Group plc (NYSE: VOD)'s desire for a sub-$100 price for its home base stations, and says "that's possible," but adds: "The most interesting price is going to be the one that's offered to the consumer, and the way the service providers package femtocells into their offers and tariffs. If the marketing isn't right then there will be no demand, and the unit price will be irrelevant." (See Vodafone CEO Seeks Cheap Femtos.)

Gilbert's confidence in mass production, and the new round of money, will also have a knock-on effect on UbiquiSys's suppliers. One of those firms is wireless chip vendor picoChip Designs Ltd. , which recently landed a new round of funding itself to help it meet demand for its 3G and WiMax chips. (See Funding Roundup and UbiquiSys Picks picoChip.)

PicoChip's VP of marketing, Rupert Baines, says his company's already prepared. "That's the nice thing about being fabless," he says. "We use Taiwan Semiconductor Manufacturing Company (TSMC) (NYSE: TSM) to do our production, and it has the scale to deliver to our needs.

"We're expecting [demand for femtocell processors] to be huge next year, and UbiquiSys is going to be shipping large volumes. We can cope with that."

PicoChip also supplies another of the femtocell hopefuls, ip.access Ltd. , and is believed to have a number of other players in the home base station market on its customer list, though Baines declined to provide any further customer details.

— Ray Le Maistre, International News Editor, Light Reading