New UBNT Article

New UBNT article by UBNT bull Mingran Wang.…

I think this is the most comprehensive article to date addressing probably all aspects. It covers its unique business model (the one which resonates with me), brief history of its product line, future potential growth drivers, and competitive barriers are much higher than apparent on the surface. Some excerpts worth highlighting:

I found Pera’s blog. In the blogs written before 2014, he has shown a lot of his visions about many different things. I had to agree with his vision almost completely. Those articles also showed his frugality and independent thinking which are important characteristics for successful entrepreneurs (the same traits were seen in Warren Buffett, Sam Walton, Jeff Bezos and many others).

It was very interesting to find that UBNT was a boot-strapped startup without any external funding (the capital from Summit Partners were all given to insiders, not the company), and it grew from zero to $1 billion market cap within six years (2005 to 2011).

As I mentioned above, Airmax was essentially a “hack” (use indoor chips in outdoor applications), so there were a lot challenges to make it work. Even after it finally worked, there were all kinds of limitations on the performance. This is why UBNT wanted to design their own ASIC chips. However, ASIC requires both time and capital investment to develop. This is why it took 4-6 years of development for this project. Finally, LTU is supposed to come out by the end of this year (final public release may need to wait for 2018). This is supposed to be a game changer, since it is very hard for competitors to catch up, due to the R&D cost and time/scale required to implement it.

In terms of revenue impact, we will likely see much more dramatic impact than previous AirFiber products simply because this is a PTMP product. With PTP products, UBNT would only sell two devices for each PTP link. With PTMP, UBNT would sell one device per end-user, and there are usually 30 - 100 end users for each PTMP network. So there could be a lot more sales for LTU.

Even with the dramatically improved performance and stability, LTU is said to have similar pricing as Airmax. This also should ensure the demand.

Among all the growth drivers, I believe the most important project is the improvement of USG and its firewall system. Router, switch and wireless AP together is a set of network equipment all managed by UniFi controllers. In the past, however, routers have been a weak link in this set. Although Edgemax has better router features, it isn’t compatible with UniFi.

This is why Pera hired a new team lead (a senior tech guru who worked on pfsense for many years) to work on USG. The road map of USG was published at the beginning of 2017, and I expect to see dramatic improvement by the end of this year. Once this is completed, it will pave the road for UBNT to up-attack the high end enterprise market. (And this is why I think this is the most important project at the moment.)

Besides USG improvement, the coming 10G router and existing 10G switch also will help to complete the set, allowing UBNT to address the need of higher end enterprise market.

Since many projects above weren’t shown to the public until a very late stage, it is reasonable to suspect that there could be a lot more secret projects coming. One interesting project or future direction was mentioned by Pera as the following:

We also have more complimentary technologies set back to UniFi and I think what you will see in our vision is you go into a building one day and you will see UniFi running everything, everything from the automation to the lighting to the Wi-Fi piece to endorse security systems that the video security systems and more. And we have teams working on all of that stuff.
This project is promising because it is a natural extension of UniFi and it builds on the same customer base (installers of enterprise/SMB equipment).

With the R&D related hiring increasing at a very fast pace in the last quarter, I would expect the company is working on many such secret projects.