Magnolia Broadband Inc. has raised $10 million to expand its range of mobile phone chips capable of strengthening carriers' network coverage, with an eye on eventually tapping the burgeoning WiMax market.
The $10 million Series E round of funding was led by new investors Grosvenor Funds and Western Technology Investment, with participation from existing investors including, SCP Private Equity Partners, Draper Fisher Jurvetson Gotham, Intel Capital, ECentury Capital Partners, Selway Partners and Silverstar Holdings.
Magnolia Broadband Chairman and SCP Private Equity Partners Partner Yaron Eitan said the round closed about two weeks ago. About $6.5 million came from the new backers, Eitan said, while SCP Private Equity Partners covered most of the remaining $3.5 million.
Bedminster, N.J.-based Magnolia Broadband, founded in 2001, has now raised about $50 million in funding. The company boasts that with their chips placed in handsets, existing mobile networks can nearly double their coverage strength without making any network upgrades.
While the company's initial products have focused on the CDMA wireless standard that dominates in the U.S. and South Korea, Eitan said the new funding enables the company to expand its product line to include chips for the UMTS standard popular in Europe, and eventually for the WiMax standard.
WiMax, an enhanced version of WiFi, has received a great deal of attention thanks to Sprint Nextel Corp.'s recent decision to spend up to $3 billion building a WiMax network.
Magnolia Broadband Chief Executive Osmo Hautanen called Sprint Nextel's decision a welcome surprise, and "an endorsement of what we've been doing."
Hautanen said on Friday that he was in Europe talking to UMTS operators about imminent testing projects. Hautanen said that as an Intel Capital portfolio company, WiMax is natural territory for the company, as Intel Corp. has been the technology's number one proponent.
Eitan said that Magnolia Broadband recently held a field test in New Jersey that demonstrated an average of 40% improvement in network capacity, "just by adding these [Magnolia] chips." Such field tests helped to boost the valuation placed on Magnolia Broadband for the new Series E round, to "quite a premium to the previous round," Hautanen said.
"The feeling is that the technology risk is gone, it works and it's ready for prime time," Hautanen said, adding that he expects Magnolia Broadband's chips to hit the market in commercial products by the beginning of 2007.
Eitan declined to name any of Magnolia Broadband's customers, but did say that "we've been talking to a lot of the handset guys, but at the end of the day, the decision will be made by the operators," who have significant control over which handsets get deployed on their networks.
