The Anglo File: Qualcomm Turns an Eye Toward Europe
By Suzanne Kapner
U.K. Correspondent
5/16/00 5:17 PM ET
LONDON -- There's little doubt that the shift toward third-generation mobile phones means money in Qualcomm's (QCOM:Nasdaq - news - boards) coffers. Just how much money and how quickly it will start flowing are issues that likely will occupy the minds of investors.
To date, investors have been focused on the former question, but it's the latter issue that poses the greatest risk, notes Wojtek Uzdelewicz, an analyst with Bear Stearns, who rates Qualcomm attractive. (His firm hasn't provided underwriting services for the company.)
Already this year the stock is off 46% from its December high of 200. But on Tuesday, the shares closed in New York at 108 11/16, up 4 3/8, or 4.19%. Still, the slide from December came even as Qualcomm is poised to enjoy surging demand for its technology, which will be adopted by most carriers as they switch from their current spectrums to the richer 3-G networks. That move will offer a whole range of new services.
To San Diego-based Qualcomm, Europe perhaps holds great opportunity. The company currently does zero business on the Continent, instead deriving 60% of its $3.9 billion in revenue for the most recent fiscal year from the Americas, with the balance coming from Asia. Until now, Qualcomm has been locked out of Europe because its patented CDMA (code division multiple access) digital technology, which transmits voice and data over mobile-phone networks, was developed after Europe had adopted a different standard known as GSM (general standards for mobile).
Over the next two years that will change, thanks to a decision by major wireless operators that establishes Qualcomm's CDMA technology as the standard for third-generation phones. Whether mobile operators in Europe choose the wideband CDMA, or Qualcomm's CDMA2000 version, they will have to pay Qualcomm a royalty.
Just how big a royalty has been the cause of some concern for Qualcomm shareholders. It was the most frequently asked question of Tony Thornly, Qualcomm's chief financial officer, during a Banc of America Securities conference in London last week.
The answer: Qualcomm's take will almost certainly be lower on these next versions of CDMA than they are currently. |
