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Technology Stocks : Nokia (NOK)
NOK 6.910-0.9%Nov 11 3:59 PM EST
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To: slacker711 who wrote (2623)11/3/1999 10:51:00 AM
From: tero kuittinen  Read Replies (2) of 34857
 
That's the rub, Slacker. If you believe that Samsung will remain a leader, Qualcomm chipset outlook is good. But if you believe that its position is being eroded, the outlook is not so good. The real competition in the CDMA phone market started this summer. This quarter is the first one that gives us a peek on how the competitive environment is changing.

Most people favoring Qualcomm have tried to write off the challenge from Motorola and Ericsson. They have argued that these companies are not making much progress in selling CDMA handsets with non-Q chipsets. So why was Q chipset sales growth at this level? Why did Qualcomm have to resort to steep price cuts to move their phones?

The most likely explanation is that Nokia and Motorola are taking market share as fast as they can ramp up production. You can argue that they are not doing so well - but the numbers don't back you up. I don't know what is Qualcomm's current chipset market share. But it is coming down fast and hard. You can always shrug this off and point to the licensing income. But I don't think the current P/E ratio will tolerate underperforming chipset unit in the long term. The great profitability of the chipset unit is not the question - the question is whether that profitability can coexist with rapidly declining market share.

Tero
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