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QCOM Doth Protest Too Much
Tuesday January 8, 12:05 pm ET
ByBob Faulkner, RealMoney Contributor
As part of a November column I wrote regarding WiMax, I noted that when a new technology, product, service and/or solution is going nowhere fast, the competition ignores it. Why give free publicity to something dying of natural causes? No one piles on the one at the bottom in the presidential debates (Ron Paul may be the exception to this rule-of-thumb). However, when something presents itself as a real threat, it is singled-out for criticism by those threatened. And that can be a good sign for a stock.
On their last quarterly conference call, Qualcomm CEO Dr. Paul Jacobs felt compelled to comment on WiMax. Jacobs noted that, "WiBro (Korea's home-grown WiMax) continues to be a commercial failure. As I've said before, the current generation of WiMax lacks true mobility, no effective support for real-time services and has poor spectral efficiency." At the time, I remember thinking, "Why are they so worked up about WiMax?"
Qualcomm only added to my suspicions over the weekend. On Saturday, I received an email from the company announcing a White Paper was available on its Web site titled "3G Provides Mobile Broadband Today." It is an overview of 3G, its development and "some perspectives on Mobile WiMax." What a surprise!
What's interesting is that much of its "analysis" is based upon comparisons to the Qualcomm's proprietary Ultra Mobile Broadband technology, which doesn't show its face until 2009 at the earliest and is considered a fourth-generation technology as well.
But UMB lost its largest potential customer late in November when Verizon Wireless announced that it will migrate to Long-Term Evolution as its 4G solution from its current CDMA EV-DO technology. Consequently, UMB may be marginalized before it even arrives on the market, so why the effort to bash WiMax?
Another tactic used throughout the paper is basing many of their arguments upon the lower costs associated with high-volume, mature solutions available today vs. the higher costs associated with lower-volume, new technologies. You can't have it both ways guys! UMB is not in the market, so it's subject to the same high start-up costs as other new solutions.
Additionally, every new chipset, even within an existing technology, starts out costing a lot more than its "mature" predecessors. That's the nature of the process with semiconductors.
Qualcomm spent a lot of time and money putting out a White Paper extolling the virtues of UMB and criticizing mobile WiMax. Why? I really don't see this document for consumption by carriers and telecommunications regulators. They'll have their own engineers evaluate the alternatives. This paper is targeted at convincing investors of the merits of the status quo and the fear, uncertainty and doubt (FUD) that will accompany those taking the WiMax path.
Those whose ox may be gored by a successful WiMax are obviously afraid. Qualcomm seems to be fixated on the subject. As I noted in an earlier WiMax article, the UK Office of Communications (Ofcom) commented in its Discussion Document from Aug. 1, 2007, that current mobile-network operators --MNO -- (H3G, O2, Orange, T-Mobile and Vodaphone) were attempting to delay a spectrum auction indefinitely.
While all types of logic were employed, what came through loud and clear was the competitive threat facing the existing MNOs. They were worried about WiMax, and they lacked an alternative solution over the next couple of years.
So for me, my two WiMax plays -- Alvarion and Clearwire -- may be down, but the competition is standing on a soapbox screaming out loud that they're worried. I like that!
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