Verve:
It is precisely because Tero has spent a great deal of time researching and following the wireless industry that he is negative about Qualcomm. You make some audacious statements in your post. My responses-
1. NOK will not only hold on to their market share and margins but will expand them over 2-4 years. NOK has several almost insurmountable advantages. First, NOK made more than 1 out of every 4 handsets sold in the world last year. This gives them exceptional economies of scale AND means NOK can demand and get preferential treatment in the delivery of scarce wireless components. Second, NOK leverages its technologies across multiple chasses, multiple bands and multiple technologies - NOK can change its manufacturing lines from one model to another in minutes when everyone else - especially the ASIANs - take hours. Third, NOK brings out 18 new phones every year, in every major technology - no one else has shown the ability to constantly refresh their product line like NOK. One cool phone does not make a long term strategy. Finally, as long as the Asian competition buys Q's expensive chipsets, their costs will be higher, not lower. We have been waiting for the asian cell-phone invasion for 10 years and I reckon we will be waiting a while longer.
2. NOK gains alot by not using Q's chipsets. For one, all of its software and hardware designs can be ported to CDMA as long as it retains the TI DSP.
3. Anyone who knows anything about wireless understands the difference between CDMA2000 and W-CDMA. Q's patent claims are not nearly as strong for W-CDMA as for CDMA2000(1X,3X and HDR). And guess what - Ericsson and Nokia have significant IP in the W-CDMA standard. And guess what else, most W-CDMA devices will be dual mode GSM/W-CDMA. So if Q wants to make chipsets for the W-CDMA world (and they do) they will have to play ball with NOK and Ericsson. Good bye dreams of a massive cost free royalty stream.
4. Sometimes the obvious answer is flat out wrong. I would argue that NOK's future seems set with its cross platform positioning, strong carrier relationships, global brand, and operational excellence. Q's future is far less certain than you make it out to be - it owns CDMAOne and CDMA2000, but what percentage of the world market will that be? It has a stake in W-CDMA but so do ERIC and NOK - it is very difficult to assess just what kind of royalty Q will be able to negotiate or what share of the W-CDMA chipset market they can capture. This is why Q stock keeps falling back to $125 after every feeble rally. |
