New York, Oct 18, 2000 (123Jump via COMTEX) -- :
Qualcomm (NASDAQ:QCOM)
Qualcomm recently sold off its established wireless infrastructure division and no longer
supplies infrastructure in the traditional sense. However, Qualcomm still owns the patents on
CDMA, which is integral for all of the 3G wireless protocols. Qualcomm has recently won court
battles in Japan and Europe upholding its ownership of CDMA patents - even in the use of 3G
protocols. As such, Qualcomm will be receiving substantial CDMA royalties on the vast
amount of 3G equipment and 3G mobile phones that will be sold.
Thus, Qualcomm will have very high revenue and operating income growth rates. Moreover,
given Qualcomm's recent divestitures - which have turned the company into an intellectual
property development house -Qualcomm will have excellent gross margins since intellectual
property has extremely low Cost of Goods.
Nokia (NYSE:NOK)
Nokia's PEG ratio is at the higher end of the industry. However, it has a great deal of potential.
Nokia is expected to have strong revenue growth, and has an excellent share of the current 2G
and 2.5G market, second only to Ericsson. However, Nokia has suffered recent setbacks in its
cellular phone division (which accounts for over 70% of its sales) and is expected to have poor
3Q results.
Ericsson (NASDAQ:ERICY)
Ericsson is clearly the king of mobile infrastructure. Ericsson has 2G networks in virtually every
country around the world and is a supplier in 50% of total 2.5G worldwide contracts signed so
far. In addition, Ericsson is predicted to have solid revenue and operating income growth. More
importantly, the company is nearly a pure play in infrastructure, since its network segment
accounts for over 70% of total sales.
However, Ericsson was harder hit than most by the cellular phone sales slow down. Ericsson
posted an abysmal -20% margin in 2Q results for its cellular phone division. Finally, Ericsson
has one of the higher PEG ratios in the industry.
Alcatel (NYSE:ALA)
Alcatel has a high PEG ratio and unfavorable predicted operating income compared to the
industry. More importantly, Alcatel's share of the 2G and 2.5G market is not nearly as strong as
Ericsson or Nokia's; this will hurt Alcatel in its pursuit of 3G contracts.
On the other hand, Alcatel has strong predicted revenues and currently holds a large share of
the mobile infrastructure market (<15%).
Nortel (NYSE:NT)
While Nortel may have an extremely strong position in routers and land-based networking, it is
still relatively new to the wireless infrastructure sector. Nortel lacks the established customer
base that Ericsson, Nokia and Motorola have, and it lags behind these companies in 2G and
2.5G market share. Finally, Nortel has a very high PEG ratio indicating that it is overvalued
compared to the rest of the wireless infrastructure industry.
On the positive side, Nortel's wireless division is growing quite quickly and its predicted
revenue and operating income growth rates are approximately 30% and 35% respectively -
among the highest in the industry.
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