re: Also, is it a sure thing that the next wave of killer apps will be broadband related? Watching the mania for i-mode phones in Japan makes me wonder if broadband is essential for wireless internet appliances.
I posted my thoughts on the delay in promise from 3G for QCOM last week I believe. Below is an article that I found today that discusses what is happening now. What you are seeing now with the NOK fade, will happen again with 3G which will really be The Sea Change. I'll add a little. I'll to try to make it short. I posted about this subject on the QCOM thread last year when I was comparing the PC sector to the cellular sector. The PC sector has been a cyclical one based on the selling of better and better PC or better software for that matter, where we would see delays in rev. as the market placed waited for the next PC or software to come out, that is called the upgrade cycle. Same has and well continue to happen in the cell sector. Back to the PC sector. PC's have reach nirvana now, plateau if you will, once a buyer buys a PC that is in the 600 range for speed, there is no reason to upgrade, (now I'm going to tie it all together for you) until of course we get (ta da, <gg>) The Next Big Thing. Which of course is broadband wireless and wireland. Back to the Cell sector. The NOK slow down is window in the slow down that will happen sector wide as consumers wait for the (here it is again) The Next Big Thing, 3G. So I see the cell phones reaching a nirvana like condition as the PC sectors has, where they will not be able to do much more with the current infrastructure until The Next Big Thing.
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Nokia, Others to Rebound on Mobile Internet Demand
Stockholm, Aug. 5 (Bloomberg) -- European phone-equipment makers, such as Nokia Oyj and Ericsson AB, are set to rebound as suppliers speed up production of parts while companies build new networks to give mobile-phone users more Internet services.
Nokia, the largest maker of cellular phones, and Ericsson, Europe's No. 1 phone-equipment company, last month warned profit growth will stagnate this quarter, sparking a 17 percent decline in the Bloomberg European Telecommunication Equipment Index since June 20. That drop isn't justified, investors and analysts say.
While Ericsson and its rivals are suffering from a lack of parts and falling prices for old phone models, there's no reason to fear a prolonged slowdown in growth, investors said. The phone- equipment market is set to more than double to $729 billion in 2004 from $346 billion in 1999, according to Motorola Inc.
``It's buying time,'' said Michel Perrin, who helps manage about $2.3 billion in equities at Cardiff Asset Management. Nokia warned about the third quarter ``because clients were delaying buying mobile phones to wait for phones offering faster access to the Internet. Yet the fourth quarter should be excellent.''
Ericsson, Nokia and Alcatel are among the six most expensive stocks on the Stoxx 50 Index in terms of the ratio of their share prices to estimated earnings this year. Still, when that ratio is compared to expected five-year profit growth -- known as the PEG ratio -- these stocks are less expensive than most others.
Growth Rates
For example, Nokia trades at 58 times estimated 2000 profit, while its expected annual long-term growth rate is 28 percent, giving it a PEG ratio of 2.1. Glaxo Wellcome Plc, a drugmaker, trades at 34 times expected profit, while its estimated long-term growth rate of 8.7 percent gives it a PEG of 3.9.
So far this year, health stocks have risen 20 percent, the best performing industry group in Europe. The Dow Jones Technology Index is now just the sixth-best performer, rising 5.9 percent after surging 37 percent in the first two months.
``The prices of the phone-equipment makers are not excessive when you consider their growth rates,'' said Olivier Lefevre, who manages 130 million euros ($118 million) for private clients at Groupe Robeco Gestion in Paris. He said recent declines by companies such as Nokia and Ericsson make them attractive.
Cardiff's Perrin said he bought shares in Alcatel, Europe's second-largest phone-equipment company, and Sagem SA, a French cellular-phone maker, this week.
Nokia shares have slipped 23 percent in the past two weeks, while Ericsson has lost 18 percent, Alcatel is down 4 percent and Siemens AG 9 percent. Before June 21, when Ericsson signaled a slowdown for this quarter, phone-equipment makers were among the best performers on the European Bloomberg European 500 Index, with the sub-index up 35 percent since the start of the year.
Temporary Problems
The parts shortages will be temporary, companies say. Stockholm-based Ericsson is being hurt buy a lack of components, such as semiconductors, from Royal Philips Electronics NV, its main supplier. Philips blamed the shortage on a fire at its Albuquerque, New Mexico plant, which is now back up and running.
Suppliers further down the chain, such as makers of equipment to manufacture semiconductors, have also said the problems are temporary.
Scott Kulicke, chairman of the world's biggest maker of semiconductor-assembly equipment, Kulicke & Soffa Industries Inc., said Thursday that while orders have been delayed because customers were short of supplies, there's no evidence that the deferral signals a slowdown in chip industry growth.
Analysts concur.
``The underlying growth is fine,'' said Boris Petersik at Donaldson, Lufkin & Jenrette in Hong Kong. ``But the industry is having a hard time catching up with the high expectations set in the first half.''
Nokia's warning last week that third-quarter profit would be in line with the year-earlier figure eclipsed a 64 percent surge in second-quarter profit. The company said demand will rebound in the fourth quarter when new phones with fast connection to the Web will be on the shelves.
Rosy Future
Ericsson expects third-quarter pretax profit to at least match that of the year-earlier period. While the company's phone business is losing money, profit at its network arm almost tripled to 9.8 billion kronor ($1.05 billion) in the second quarter. The network unit accounts for more than two-thirds of total sales.
Equipment makers are taking in more network orders as phone companies, such as Vodafone AirTouch Plc, expand and upgrade their wireless networks to handle more users and transmit data faster. Ericsson, which says it has a third of the mobile-network market, estimates total sales will rise more than 25 percent this year.
Alcatel last week posted a 43 percent rise in second-quarter profit and said full-year sales will grow 35 percent, boosted by increasing demand for Internet equipment and mobile phones.
``The future is still rosy,'' said Esa Mangeloja, an analyst at Conventum Securities. ``The market is growing at a fast pace.'>>
Greg |
