QCOM--=DJ Qualcomm In China: Soap Opera Plot Too Much For Wall St
06/01/2000
Dow Jones News Services
(Copyright ¸ 2000 Dow Jones & Company, Inc.)
By Johnathan Burns
NEW YORK (Dow Jones)--In the brittle world where politics, technology and money meet, Qualcomm Inc. (QCOM) has played the fortune tossed lover left at the alter by the fickle groom.
And every day, like some long-running soap opera, the drama unfolds anew: Will China take back Qualcomm? Will China dump Qualcomm again? What wireless equipment standard is China two-timing Qualcomm with?
It is the kind of plot that leaves Wall Street with little confidence in predicting an ending - which shows in Qualcomm's stock, off more than 60% from its 52-week high set in January.
The twists to the story have been well documented. They have also been exasperating for Qualcomm Chief Executive Irwin Jacobs.
"It's been quite confusing," he said. "But it is still a very fluid situation."
The situation is this: China, the world's third largest and still relatively undeveloped cellular market, may or may not use Qualcomm's CDMA technology as a building block for a nationwide wireless network.
On Thursday, a state-run newspaper quoted a China United Telecommunications Corp. spokesman as saying the company's plan to roll-out a CDMA network are "still on track."
That directly contradicts what sources have told The Wall Street Journal, which reports the company, known as China Unicom, will further deploy a wireless network based on the competing GSM technology. In addition to this and other newswires, Dow Jones & Co. publishes The Wall Street Journal and its international and interactive editions.
If the latter proves true, that means relatively little of the $25 billion the Chinese are expected to spend this year on wireless networks - as projected by Lehman Brothers telecommunications equipment analyst Tim Luke - will flow into Qualcomm's coffers.
Luke does, however, point out that China Unicom representatives said this week they will likely trial a next-generation CDMA technology.
And while one hand at China Unicom apparently doesn't know what the other hand is doing, the contradictions have clearly given investors the jitters.
In the last month, Qualcomm's stock has dropped from a May 2 closing price of 113 11/16 to 66 3/8 Wednesday.
Part of the pressure has been a result of a broad tech-sector sell off. But two other factors have also come into play. Qualcomm continues to be assaulted by rumors of competitors, like Motorola Inc. (MOT), developing their own CDMA-based technology for advanced generations of mobile networks.
"Does our intellectual property rights apply to third generation CDMA?" said Jacobs. "Yes."
Jacobs, understandably, is insistent that any CDMA technology developed and sold commercially sold in the future won't be able to skirt Qualcomm's licensing and royalty requirements.
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