People can discuss about 1XRTT, GPRS, HDR, cdma2000 and W-CDMA on this thread until the cows come home. What drives the industry sales during the next 6 months is going to be the boring, plain vanilla 2G sales.
Tero, ever read "The Clouds" by Aristophanes? Well, if you haven't, the story's basically a satire of two diametrically opposed schools of thought in Greek culture, known as Sophistry and Right Reason. Adherents of Sophistry, as their name might imply, spent their days cooped up in dark rooms, doing nothing but philosophizing in a wistful manner and living a semi-decadent, purposeless lifestyle. Those who believed in Right Reason, on the other hand, were obsessed with self-discipline and self-denial, and rigidly followed the dogma that they were taught by their elders.
What Aristophanes was critical of, of course, was how destructive it was to follow either one of these schools of thought to their logical extremes. The same holds true here, as it's quite obvious that two contrasting analytical approaches have taken flight here, one focused on near-term company/financial occurances, and one focused on long-term technological trends; and once again, the problem comes from not finding a middle ground.
I'm not going to argue that short-term events don't matter. A dollar earned in 2001 is no less valuable than a dollar earned in 2004 (perhaps it's more valuable, due to the fact that inflation and risk have to be factored in more when looking at earnings further out). Likewise, I'd agree that it sure wouldn't help a company's long-term R&D budget, sales/marketing clout, economies of scale, or brand (the last of which matters if it's a consumer-focused company) if its business were to do horribly in the near-term, but is counting on success a couple of years from now to make up for it. So, yes, the short-term does matter tremendously, and if you see some of the posts that have been written here as of late, both by myself and by others, many of them have related to short-term industry trends. This board hasn't quite yet turned into a Gilderesque forum for futuristic daydreaming.
But my guess is that the end goal of those who are here isn't to discuss short-term trends, long-term trends, or any sort of industry trend in and of itself. Rather, it's to make quality wireless-related investments, with the analysis of different types of trends only acting as a means to this end. Now, with this kept in mind, the next thing you have to focus on in is valuing a potential investment, as all other fundamental analysis flows from asking that question. As I'm sure you know, a company's generally valued by projecting its discounted future long-term cash flows.
In this statement, the word "long-term" can't be stressed enough. A company that has $2 billion in assets, and is expecting to earn $4 billion in the upcoming year on 300% annual growth won't be given a P/E of even 2 if it isn't expected to earn another cent after that year's up. Likewise, if I was invested in Intel, and if on Monday, AMD announced that they'd developed a 300 Ghz. processor based on quantum computing that could be manufactured for $10 by a 6-year old in a Malaysian sweatshop, with the only catch being that the processor won't be ready for another two years, do you think that I'll bother caring about how the PIV will stack up against the Mustang in 2001? Hell no, I'd sell every share of Intel that I might have, and quite possibly reinvest that money in AMD (note: I'm not trying to create any real-life analogies or parallels here). I'm sure that a number of analysts and fund managers would do the same thing. In the end, the shareholder value delivered in the two years before the new AMD chip is released is far less valuable than the value that might not be delivered in the following decade or so, and thus the long-term problems far outweigh the potentially bright short-term outlook.
But before you take this the wrong way, I'll mention that I did read the part of your post which talked about the importance of thinking long-term, and I'm not accusing you of only focusing on short-term trends. However, you also wrote:
In this environment, "Just you wait until 2003!!" does not cut the mustard with investors. People in this thread have done a great job of ignoring the 2G market while shifting the focus to 3G. I doubt the markets will be as nobly far-sighted if they detect 2G sales weakness going into the fourth quarter.
What I take this to mean (correct me if I'm wrong) is that regardless of how promising the future is for a company, people won't care for it if it isn't doing well short-term. In other words, in such cases, you'd be counting on investor ignorance to make a company's long-term potential irrelevant to the performance of its stock price in the near future.
While such a mentality might potentially save some short-term anguish, applying it can also carry some significant risks in both directions. In the past couple of years, I've seen a number of companies, such as 3dfx and several retail clothing firms, have their shares get hammered even while they're putting up tremendous growth due to the fact that the market was able to see clouds on the horizon. Likewise, I've seen shares of companies like Rambus and Gemstar soar into the stratosphere, never to fully return to Earth, the moment that Wall Street got wind of the given company's future prospects, even though these prospects were hardly reflected in their near-term fundamentals. Many of those who took a wait-and-see, short-term-focused approach in these circumstances, both for the former and the latter types of companies, ended up seriously regretting their decisions.
Eric
PS - Speaking of the short-term, I'm interested in seeing what response Nokia has to the Siemens SL45 and Ericsson R380. I think that a 90g MP3 phone with an in-built voice recorder just might have some appeal with the teenage/college/yuppie crowd, and that a PDA phone with a pen-based interface that doesn't require a seperate attache case to carry along might be popular with some business users. |
