Bill,
Please respond to the significant disagreements between the articles below, and your article on Licensing and Chipset Sales Revenue - especially the part where you assume QCOM "are in no position to compete effectively with InterDigital when it comes to 3G chip development and sales."
I admire your research drive, but not it's accuracy - certainly not when you make absurd comments such as the quote above.
Your site would be more credible with more balance, less cheerleading -- and above all, an understanding of the wireless market.
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First Union on Q today...
KOREA IS A WIN-WIN SITUATION FOR QCOM - MEDIA CONSISTENTLY CONFUSED
* sum of quarters does not total to year figure because of rounding on 4-for-1 stock split adjustment
KEY POINTS
-- According to Bloomberg news, SK Telecom, KT Freetel (soon to be merged with Hansol), and LG Telecom are all to choose as their third-generation (3G) network standard W-CDMA developed by Ericsson, Nokia, and NTT DoCoMo, if they
win 3G licenses as expected. We have been unable to confirm any such decisions by those carriers.
-- According to QUALCOMM's Korean country manager, none of these carriers has announced a formal decision regarding its 3G technology, and none is expected to make such announcement for perhaps two to three months.
-- We believe the recent weakness in QCOM's shares created by the Bloomberg story is a buying opportunity because we think the media routinely misunderstands QCOM's business model. QUALCOMM will be receiving royalties on both W-CDMA and cmda2000 at the same rate, so that from a royalty standpoint QCOM is indifferent as to what 3G version of CDMA carriers choose. We have confirmed that Samsung, LG, and Hyundai, the primary equipment suppliers in the
Korean wireless market, have all extended their respective licenses with QUALCOMM to include W-CDMA, at the same rates as current generation CDMA.
-- QUALCOMM is developing a W-CDMA chipset, and though the company has not formally announced a timeframe, we believe the company plans to sample that chipset in calendar Q4 2001. However, our current models conservatively assume
that QUALCOMM receives no W-CDMA royalty income until FY2003 and that the company wins no W-CDMA chipset market share. Company management has said it will be unhappy with anything less than 50% of the WCDMA chipset market.
-- We believe today's weakness in the stock represents a buying opportunity for long-term investors.
DETAILS:
Several days ago, Korea's MIC announced that the government agency would permit Korea's wireless carriers to choose either cdma2000 or W-CDMA for their 3G
networks. Subsequently, Bloomberg published a story indicating that SK Telecom, KT Freetel, and LG Telecom have all decided to implement W-CDMA for their 3G networks. We have not been able to confirm any such decisions. According to QUALCOMM's Korean country manager, none of these carriers has announced a formal decision regarding its 3G technology, and none is expected
to make such announcement for perhaps two to three months.
We believe the negative sentiment over the Bloomberg story is due to a continued misunderstanding of QCOM's strategic position in 3G CDMA technologies. QUALCOMM will be receiving royalties on both W-CDMA and cmda2000
at the same rate -- no difference. We have confirmed that Samsung, LGIC, and Hyundai, the primary equipment suppliers in the Korean wireless market, have
all extended their respective licenses with QUALCOMM to include W-CDMA, at the same rates as current-generation CDMA. Therefore, we fail to understand the language in the Bloomberg article that implies that somehow QCOM is being repudiated if carriers choose W-CDMA. It looks like to us that 3G technology of any version is a win-win for QCOM.
QUALCOMM is developing a W-CDMA chipset, and though the company has not formally announced a timeframe, we believe the company plans to sample that chipset in calendar Q4 2001. However, our current models conservatively assume
that QUALCOMM receives no W-CDMA royalty income until FY2003 and that the company wins no W-CDMA chipset market share.
Ericsson (ERICY, $21, Buy) has already signed a royalty-bearing license for W-CDMA at the same royalty rate as the company's current generation CDMA license; and Ericsson was one of the original developers of W-CDMA. NTT DoCoMo
is not a mobile equipment manufacturer; thus, it has no need of a licensing relationship with QUALCOMM. Finally, based on our discussions with Nokia (NOK, $52, Strong Buy) engineers, we believe it is only a matter of time before
Nokia extends is current generation licensing agreement with QUALCOMM to include W-CDMA. The fact that there continues to be controversy about QCOM's royalty on W-CDMA equipment astounds us.
We reiterate our Buy rating on QCOM shares and would use the recent weakness as a buying opportunity. We believe the shares are mis-priced because of widespread misunderstanding about QCOM's technology position in future 3G
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Apparantly George Gilder disagrees with you as well:
"The power control system, as I recall, has three layers--the first, which is described here, is a coarse automatic gain control which moves the power up and down 25 percent according to the needs of the base station. There are also two levels of more refined power regulation some 800 times a second. It is Qualcomm's mastery of power control that enabled the creation of High Data Rate (HDR), which is based on a weighted fair queuing algorithm which grants the user with the strongest signal a conditional preference in transmission.
But power control is only one of Qualcomm's unique assets in doing CDMA. Most important will prove to be its experience in integrating all these CDMA functions in working systems. I think it is likely that Qualcomm will dominate the chip sets for both WCDMA and CDMA2000" |
