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Technology Stocks : The New Qualcomm - a S&P500 company
QCOM 181.30-0.5%Dec 11 3:59 PM EST
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To: JGoren who wrote (4198)12/14/1999 3:30:00 PM
From: engineer  Read Replies (1) of 13582
 
If I were the top level manager at NOK, I would think like this. (I do not know anything about this sale, but this is how I would justify it if I were him...)

I have a division which has been drawing $XM's per year so far since 1994 and they have NO PHONE out there. Hence I have lost faith in their ability to produce phone number 1, much less compete with the Japanese who are building out phones like crazy and Samsung who is selling to 4 countries right now. they are both using the QCOM chipset and making alot of money with it.

China is going to pop in one year and I have NO CDMA phone to offer them. I am losing share in the US market to everyone who has a CDMA phone, and possibly my biggest customer is killing me to get them ready for a CDMA overlay solution.

If I buy the handset guys who know how to make the chipsets work from QCOM and make the RF manfacturing work right, then I can produce a phone with less margin, but be on even par with the Koreans and Japanese in the market. I do not need more mfg space, but I need the R&D technology. OK, so I will agree to buy ASICS from QC and use the R&D group to get my phones kickstarted. I agree to buy the ASICS for some period of time until some other technology comes up that I can share a lead in. It is better than loosing the whole market to the japanese who are going to enter the US market big time and the Koreans who have a giant foothold in all of ASIA.

I will make a cost decision that spending $1B now and gaining back early entry into China is worth loosing 5 points of margin on the phone. I will not persue the ASIC thing until I see my business stablize well into the year 2003-2005.

All this is of couse hypothetical and derived from only my own mind....
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