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Technology Stocks : Nokia (NOK)
NOK 6.730-0.7%Nov 14 9:30 AM EST
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To: Eric L who wrote (4500)5/1/2000 10:27:00 AM
From: tero kuittinen  Read Replies (2) of 34857
 
I'm a Lutheran - I believe in hating the sin, not the sinner. It's the overdone hype that annoys me in any company. It just so happens that right now, the CDMA crowd led by Q is the worst sinner in the telecom industry.

When I asked Peter to come up with one company with a succesful second-generation CDMA handset strategy, his choice was Audiovox. VOXX just happens to be a prime example of what the overblown CDMA hype can do to investors.

All through the last winter, Audiovox was built up as a challenger to Nokia. Here was a company with a big emphasis on making CDMA phones for the North American market. The CDMA crowd had a sweet siren song to lure investors into VOXX. Ultra-fast sales growth... technological edge... profit nirvana right around the corner.

As long as VOXX was buoyed by all this hot air, it went up like a balloon.

Then something tragic happened. The 1Q 2000 results. In the cold light of dawn, Wall Street woke up and got a good look at what it had gone to bed with. And it recoiled in horror; VOXX is now down by more than 50% from the March high.

The numbers: Wireless Group gross profit margin crashed down to 7.6%. Yet the year-on-year sales growth came in below 80% - weaker than Nokia.

These numbers remind me of the "Frog in a Blender" animation available at www.joecartoon.com. Setting number 8.

Now - since Audiovox is ten times smaller than Nokia, it would need to post far higher sales growth to have even a hope of ever becoming genuinely profitable.

But this CDMA wonder boy can't even match Nokia's TDMA sales growth in USA - let alone global sales growth. The next big thing turned out to be the same old, same old: a sordid little regional manufacturer caught in the blender of fading profitability and tepid growth.

Audivox as a Nokia challenger? Eeek - I'm so scared.

Tero
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