E-MAil sent to Blomberg by an SI member.
As a telecom investor interested in both Qualcomm and Nokia, I read the July/Aug 2000
article, "High, Higher, Wireless" with great interest. There is one area in the article to which I
must take exception. It is the area where Maggie, relying on Chase H&Q states that "Qualcomm
... sees its (CDMA CHIP) market share dropping from 77% to 43%, while Nokia's will rise
from 9% to 25%." The analyst at H&Q who handles Qualcomm is a Mr. Ed Snyder. The
information on market share was given to Maggie by Mr. Snyder. It appears to me to be very
inaccurate.
For many months Mr. Snyder has given interviews and produced reports that have been
consistently very negative toward Qualcomm compared to other respected telecom analyst that
cover the company. These other analysts include a) Mark Roberts of First Union Securities, b)
Alex Cena of Salomon Smith Barney, and Walter Pircyk of Paine Webber. In various
interviews including some on MSNBC, Mr. Snyder has constantly reported as factual,
information that, I believed to be factually untrue as did the other analysts who sometimes
appeared at the same time as did Mr. Snyder. He then expressed his negative opinion of
Qualcomm based on this information. Most of these 4 analysts including Mr. Snyder are quite
positive on Nokia as am I.
Nokia will not achieve this market share for several reasons:
1) Nokia has been unable to sell a successful 2nd generation CDMA Chipset to date. The
quality is such a problem that Nokia phones have been removed from Sprint and Verizon in the
US due to quality problems. The problem is so acute that last week, Nokia chose a Korean
CDMA phone maker named Telson to manufacture private label CDMA phones for Nokia
using Qualcomm's CDMA chipsets.
2) Now wireless phone operators in the US (Sprint and Verizon), Korea, Japan and elsewhere
are in the process of replacing 2ond generation Qualcomm 95A or 95B chipsets with 3rd
generation chipsets using 1x MC technology. In as much al Nokia has been unsuccessful in
developing chipsets for the 2nd generation 95A and 95B technology, it is most unlikely that
they are at al close to developing 3rd generation chipsets. However, due to the fact that these
1X MC chipsets handle double the number of calls that may be handled on the operators
network and have the capability to handle data at 144Kbits/second (twice the rate of the 56K
dial up modems on home computers) compared to the slow 14.4 K bits/sec on existing 95A
CDMA networks, most existing CDMA operators are extremely eager to begin shipping new
phones that handle the 1X MC standard. In fact operators in US, Korea, and Japan will have
1X MC operating by 4th quarter 2000 or 1st quarter 2001. Operators in Canada, South
America, Australia, New Zealand, Taiwan probably will not be far behind. Nokia isn't even
close to having a 1X MC chipset because they can not even get the 2nd generation CDMA
chipsets to work. Also, China has announced that they plan to do large scale testing on 1X MC
in 2001.
3) Nokia decided to attempt to develop chipsets internally based on an alternate 3rd generation
CDMA system called DS CDMA . To date, specifications for this technology have not been
finalized and it is in testing phase at various sites. Nokia admits that they are 18 months behind
Qualcomm in developing 3rd generation CDMA chipsets. They chose to develop an alternate
CDMA technology primarily to attempt to skirt some of Qualcomm's patents on 3rd generation
CDMA technology. To date Nokia (which has a 2nd generation Qualcomm license) has not
taken out a 3rd generation license from Qualcomm, who holds the key patents on CDMA for
mobile wireless. Thus, when Nokia does finally gets 3rd generation CDMA chipsets
completed, they will both be 18 months late to market and have major patent problems.
From this it should be clear that Ed Snyder of H&Q has used Maggie to publish factually untrue
information that supports his persistent extremely negative evaluations of Qualcomm. If I were
in your position, I would very much resent being used by Ed Snyder to spread untrue negative
information. If you wish to verify the facts I have listed above, I suggest you discuss it with any
of the other telecom analysts mentioned above. Nokia is just not going to jump start its market
share of 3rd generation CDMA chipsets and, if it is not to be shut out of the CDMA market in
the US, will be forced to buy chipsets 1X MC chipsets from an outside vender, at least for a
few years.
While much of what I have stated sounds very negative toward Nokia, it really isn't. Nokia
first and foremost is a low cost phone producer having roughly 20% of the exploding world
phone market and banking huge profits doing so. As a primary supplier of the 2G technology
known as GSM, they have their hands full increasing production this year. When Nokia and
Qualcomm do come to terms on the 3G chipsets and patents the result will be outstanding
opportunities for both companies.
Please let me know your reaction to this analysis. I suggest that you may want to consider a
retraction. It would be an interesting stock market piece to explore Ed Snyder's efforts to
generate negative financial press for Qualcomm and compare it to the views of various other
telecom analysts. |
