Wingcast partners pull plug on venture

foulshot

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June 4, 2002


Wingcast, the joint venture between Qualcomm and Ford Motor Co. that aimed to offer wireless Internet access in autos, shut down yesterday, stalling before it even got out of the starting gate.

The San Diego company will be liquidated, with its some 200 employees given severance payments, said David Reuter, a Ford spokesman.

Qualcomm, which invested $25 million for a 15 percent stake in the failed venture, previously wrote off $14 million and stopped funding Wingcast in May 2001. The company expects to write off the other $11 million in the third quarter of this year.

While Ford would not disclose how much it poured into Wingcast, industry estimates put the investment at $100 million to $200 million.

Ford said it decided to pull the plug because the startup company did not fit with the automaker's new "back-to-basics" strategy.

"In the best interest of shareholders and for a number of other reasons we decided continued funding of Wingcast was not in our best interests," Reuter said.

Aside from the cost of developing the technology and running the business, he said consumers may not be ready to embrace telematics, the industry parlance for the technology that combines telecommunications and electronics.

It is an inauspicious end to a company that was launched with much fanfare in the summer of 2000. Ford and Qualcomm pledged millions and planned to go head-to-head with General Motors' OnStar service, considered the industry leader.

Making deals with Verizon and Infiniti, Wingcast aimed to offer drivers e-mail and Internet access, the ability to schedule appointments, summon a tow truck, and even receive recommendations on the hottest nearby restaurant. The 2003 Wingcast Infiniti models were slated to start production in the next few weeks.

Despite the grand plans, there were troubles between Qualcomm and Ford almost from the beginning, with each company having a different goal. While Qualcomm viewed Wingcast as a way to expand the market for its wireless technology, Ford considered Wingcast fundamentally an automotive company. The fissure in visions resulted in Qualcomm's decision to stop investing in Wingcast last May.

Key employees, including Greg Heinzinger, a Qualcommm vice president, who were on loan to Wingcast, returned to Qualcomm late last year. Heinzinger is a college friend and trusted ally of Paul Jacobs, president of Qualcomm's Wireless Internet division and chief backer of the Wingcast deal.

The employees still at Wingcast learned of the company's fate at a hastily arranged afternoon meeting. The staff, the majority of whom were highly paid professionals, were upset with the amount of the severance. In addition to the $4,650 in severance pay, Reuter said employees will be able to file claims with a liquidation company for additional money.

The shutdown is another setback for Ford, which has been hurt by the Firestone-Explorer scandal and lost $5.45 billion in 2001 and $800 million during the first quarter of 2002.

But Andrew Cole, a wireless analyst at the London-based strategy consulting firm Adventis, said the whole telematics industry is in a state of flux. Increasingly, automakers are realizing that the market potential is not yet there.

"The market is in its infancy and the way the players went into the market was just wrong," Cole said.

Automakers initially were trying to grab the whole market for themselves but now are realizing they will have to share the business with wireless carriers. Even General Motors, which has offered its OnStar service since 1996, may have to rethink its strategy.

Cole sees a future where car makers build cars to work with wireless companies' telematics offerings. He expects the industry to go through a "seismic" shift, with other telematics companies shutting down or changing tack.

Ford is still exploring services offering telematics using Bluetooth, which will let a user's cell phone interact with a vehicle's electronics system using radio waves rather than wires, eliminating the need for costly on-board hardware or a separate service. Reuter said the company is exploring its options regarding telematics services and that the Wingcast experience provided an important foundation.

"It is not like we would be starting from scratch," he said.

Qualcomm said it would continue to do business in telematics as well.

"Qualcomm will continue to benefit from its license to use some of the intellectual property developed by Wingcast," Paul Jacobs said in a statement.

Cole calls Ford's decision to shut down Wingcast a pragmatic business decision but says the venture had promise. Instead of investing in costly proprietary technology that only performed a few functions, Wingcast had planned to be a reseller of Verizon's wireless service and offer a variety of packages.

"Ironically, of all the players out there, Wingcast's was closest to the right model," Cole said.
 

JDC

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This really screwed the company I work for. We had contracted with Wingcast to make a two way communication system for your vehicle. It was going to be absolutely awesome... "was" being the key word.
 

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