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Technology Stocks : Nokia (NOK)
NOK 6.750+0.3%12:06 PM EST
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To: r.edwards who wrote (3118)12/27/1999 10:07:00 AM
From: tero kuittinen  Read Replies (2) of 34857
 
Here's the problem with the current telecom euphoria: projections about the next five years based on last winter's growth and profit margin numbers. Sprint's year-on-year subscriber growth may stall to 20-30% during the 4Q 1999. Compare that to the 150% growth the company still had last winter. CDMA subscriber growth during the first half of 1999 is not the benchmark for the future. It was based mostly on sales in two countries: Korea and USA. Korea's markets are saturating and the initial subscriber surge in countries initiating CDMA service is a transient phase produced by high ad spending by new operators.

There are still no projections showing CDMA's market share much above 20% by 2004. That picture has not changed during the last two years. The new CDMA markets are not like Korea and USA, because CDMA is not the standard of choice for leading operators in markets like China or Mexico. What we'll get in these markets is a brutal price competition, dictated by the digital standard with the largest established subscriber base. We're already seeing in Japan, Hong Kong and Singapore that CDMA is not faring as well as advertised against entrenched digital standards. No landslide "switching to CDMA" is taking place.

Looking at Qualcomm's chipset margins from the time the company had 90% market share and projecting that to the future is another bear trap, for obvious reasons. Besides, there is no way to project the size of write-offs stemming from projects like Globlstar. There is no way to calculate the impact of being sidelined from W-CDMA market completely, if that happens, either.

Tero

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