Qualcomm stock falls on Korea woes
By Timna Tanners
LOS ANGELES, July 7 (Reuters) - News from Asia slammed Qualcomm <QCOM.O> stock again as South Korean companies said on Friday they may use a competing cellular phone technology, although industry analysts say Qualcomm still stands to gain.
Company officials with South Korea's three major telecom service providers said they were favoring W-CDMA, the wireless code division multiple access technology created by Finland's Nokia <NOK1V.HE> and Sweden's Ericsson <LMEb.ST>, rather than Qualcomm's third generation CDMA wireless standard.
The stock of San Diego-based Qualcomm fell 5-1/16, some 8 percent, to end at 56-5/8 on Nasdaq. Qualcomm was the third most active issue with more than 28 million shares traded.
Qualcomm officials were not available for comment.
South Korean companies SK Telecom <17671.KS>, Korea Telecom <30200.KS> and privately held LG Telecom said they preferred W-CDMA over CDMA 2000 in a recent public hearing.
The code division multiple access, or CDMA, technology dominates in the United States, but competes globally with the European Global System for Mobile Communications, or GSM, standard.
The so-called third generation CDMA technologies allow for far faster data transfer rates and for much more robust and sophisticated Web browsing on devices.
Qualcomm stock has been under severe pressure after it recently warned of expected lower chipset orders in South Korea and also on news that China's second largest telephone carrier scrapped plans to use its current generation CDMA technology.
Wall Street analysts said, however, that Qualcomm would still collect royalty payments from either flavor of CDMA, although some said opportunities to supply chipsets may be less attractive if the Korean companies opt for W-CDMA.
"Qualcomm benefits the same in terms of royalties regardless of which version of mobile CDMA an operator chooses to deploy," Brian Modoff of DB Alex. Brown wrote in a report. "What is unclear is their market share for W-CDMA chipsets."
Modoff has a strong buy rating on Qualcomm.
"We think this news will be perceived as being negative for Qualcomm," Merrill Lynch's Michael Ching said in a report. "Many believe that Qualcomm will ultimately receive a lower royalty payment for W-CDMA phones, and that there will be more competition in the W-CDMA chipset market."
He added that Korea's decision to adopt W-CDMA could induce neighboring countries to follow suit. Merrill Lynch has a neutral opinion on Qualcomm's stock.
Qualcomm's stock has fluctuated wildly in recent weeks as investors appear to react to speculation on what type of cellular technology target marketplaces will choose. In addition to the different varieties of CDMA, there is a GSM standard preferred in most European countries.
The stock fell from as high as $200 in January, but remains above its 12-month low of 33-15/16.
Analyst Pete Peterson with Prudential Volpe said investors appeared to be overreacting and excessively punishing Qualcomm shares.
The South Korea government has not yet made a decision on which technology the country will adopt. If W-CDMA is chosen, commercial service would not begun until 2002 and the firms are likely to continue using CDMA 2000 in the existing cellular spectrum, Peterson said.
"My read is they are floating a trial balloon ... to see how the investment community and government feels about (W-CDMA)," he said. "The stock movement is just on quotes in the absence of anything solid."
Some analysts have suggested the company's stock price may have already incorporated uncertainty over what countries will adopt Qualcomm's version of CDMA.
16:35 07-07-00
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