2006 Annual Report - Telular

1997–19991997:Telular acquires WirelessDomain, a radio developerthat specializes in the designof digital cellular products.1998:Telular enters the telephonyfixed cellular terminal marketwith AMPS and digital TDMAproducts.1999:Telular introduces itsTELGUARD DataBurst andMicroBurst, with small packetdata messaging service.Telular signs a global agreementfor TDMA Fixed WirelessTerminals with EricssonTo capitalize on the vast opportunities for Telguardand terminals, we are committing additional resourcesinto this segment at the same time that we leverageexisting relationships with leading wireless operators.Complementing our investments in the fixed cellularterminal business, we also will continue to invest ona highly targeted basis in our phone business, withthe primary goal for this business unit to be generatinga positive cash flow. We believe that scale achievedthrough organic and non-organic growth and the plannedcost reductions taking effect over the next few quarterswill enable us to realize this goal.Technological Change Opens New Markets andNecessitates Wireless Alarm SolutionsSince we introduced the first GSM products into thealarm industry, we have seen a dramatic increase indemand driven in part by the compelling value propositionthat our products have brought to the market.Our introduction of digital GSM technology has morethan cut in half the cost of both wireless productsand ongoing services. Additionally, the FCC has issueda mandate that allows wireless carriers to no longersupport their older analog networks beyond February2008 which is driving security companies to replacedeployed analog wireless solutions with digital solutions.One leading security company recently projected thatthis deadline will necessitate the installation of 62,500cellular units per month just to meet the FCC mandatenot including new installations. To put this in perspective,we have achieved best-ever performance forTelguard units shipped in the fourth quarter of this year,but only shipped one third of the amount that would berequired to meet the above conversion projection.And this is only one of the major growth driverson the segment. Historically, 90% of our business hasbeen commercial, and with the introduction of TelguardDigital, the residential, small business, and home officemarkets are all now new opportunities. We expect therising number of cell-only households and increasinguse of VoIP technology, most requiring a wireless alarmconnection, to further support continued growth of themarket for our products. Additionally, we are planning toexpand internationally based on our technology platform,which already works on the GSM standard that is thefoundation of most of the world’s wireless operators.