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Technology Stocks : Nokia (NOK)
NOK 6.775-3.6%3:59 PM EST
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To: slacker711 who wrote (2602)10/26/1999 10:43:00 AM
From: tero kuittinen  Read Replies (2) of 34857
 
Here's the interesting part - GSM handset growth doesn't have to match the CDMA handset growth to upset all predictions. The volume lead is now so big that performing just a little better than forecast will turn into a market share windfall in 2003-2004. Current predictions peg GSM handset market share around 60% in 2003. A couple more quarters like this and we're looking at 63-66%.

The mobile network sales growth indicates that GSM is gaining share in the mobile infrastructure market - that translates into better than expected GSM handset sales with a 1-2 year time lag.

I don't care that much whether CDMA ends up with 20% or 17% of the global handset market in 2003. You see - nobody is making money manufacturing CDMA handsets. Nokia is the only company with a respectable profit margin in the mobile handset business. And that's why GSM projections are so crucial. The Asian companies made the strategic miscalculation of depending on CDMA.

If GSM stays on track to getting 60-65% of the global handset market by 2003, majority of the Asian companies will never see decent profit margins. Like Sony, they will watch their handset divisions drown in red ink, just as the massive third generation R&D bills have to be paid. The only viable threat to Nokia on the handset side comes from companies that can spread the development and manufacturing costs between GSM, CDMA and TDMA. Motorola and Matsushita seem to be the only genuine threats right now.

Tero
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