Nokia will buy CDMA-enabled chipsets from South Korea's Telson Electronics.
Qualcomm's All Over the Yard, Again
By Bill Mann (TMF Otter) from Motley Fool
June 26, 2000
Summary: Qualcomm's had the best of times and the worst of times over the last two weeks. China is on-again off-again (not really), Nokia's gonna buy Qualcomm (not really), and Nokia is going to use Qualcomm chips (yes, really).
Market drama-queen Qualcomm (Nasdaq: QCOM) has danced all over the yard over the past two weeks as good news, bad news, rumor and insinuation send its stock price up, down, back up, and then down again. What's been troubling has been that it's seemed every time one of the business events came out, Qualcomm's stock seemed to run the opposite direction.
As I have said several times before, this company's unwillingness under most circumstances to manage its shareholders' expectations is likely going to keep it beholden to the unreasonable moves and self-fulfilling prophesies of the momentum investors. And that's too bad.
In the last several days, the company's newswire has read like the story line for Melrose Place. First came the ill-hidden secret that the company's partner in China, China Unicom (NYSE: CHU) was going to forego the current generation Qualcomm wireless produces, followed almost immediately by signs of slowing growth in the South Korean market, the largest for Qualcomm-enabled Code-Division Multiple Access (CDMA) networks.
Anthony Thornley, Qualcomm's CFO, publicly announced that a bankruptcy by troubled Globalstar (Nasdaq: GSTRF) , owned 6.4% by Qualcomm, would impact its bottom line by about $0.10 per share.
Then came other events: handset Rule Maker and NOW 50 company Nokia (NYSE: NOK) made a huge concession to Qualcomm by announcing that it would buy CDMA-enabled chipsets from South Korea's Telson Electronics.
Telson has a pre-existing agreement with Qualcomm for chips for CDMA. As such, Nokia is stepping partially away from its own troubled CDMA products and outsourcing though a specialty supplier, ending its vow to use internally
produced chipsets for CDMA
Finally, rumor came out at the end of the week that Nokia would be buying Qualcomm, a move that on the surface would make absolutely no sense, and even less so with some cursory research.
The outcome? Qualcomm ran up and down, and ended last week almost where it started. This is just an unfortunate by-product of a company that has taken on religious status for its proponents (including some Wise analysts who made their mark predicting its run last year), and that of a demon to its critics and competitors. You've got a better chance solving Northern Ireland's problems than successfully arguing that the truth lies somewhere in the middle.
What is curious is that Qualcomm, with its propensity to run up and down, did not move up much upon the news that Nokia is going to be buying its chips. There are several potential answers for this, none of them great.
First, Qualcomm's run up late last year was SO overdone, that now, 70% off the high, it is still overvalued.
Second, the news of slowing sales in Korea has tempered the positive potential of Nokia coming on board. Both of these are kind of "you get what you ask for" arguments.
They are essentially saying that Qualcomm was worth more as a mysterious "story-stock" than it is as one with real world revenues, operations, and problems.
The end news is that Nokia's decision is really good for both Qualcomm and Nokia. We can expect closer cooperation between the two as time goes by, and wireless markets such as Korea will take their appropriate place in the overall global perspective. |
