Tek,
<< restructure your portfolio >>
It is not major surgery.
QCOM yesterday was 20% of my port and today it is 17%. I took NOK from 2% to 5% yesterday. QCOM will probably go from 17% to 15% by year end and I'll Probably add TXN to the tune of 5%. Final decision is not yet made.
Out of favor Wireless thus becomes 25% of port. I'm playing it 3 ways as opposed to one. One Gorilla on Main street and 2 Kings.
I will hold Kings lightly. QCOM remains a core hold.
As for QCOM, there are several reasons I've taken it down a bit.
One reason is that in the last 2 years they have failed to attract significant new CDMA users and this has an impact on their growth. On the positive side, China Unicom could be a very significant new user, in what will be by 2004 the largest wireless market in the world. QUALCOMM's perseverance on the risky China gambit deserves loud applause from us shareholders.
The second reason is that CDMA will only play a small roll in the initial wireless data tornado (which is perhaps a year away), and it appears that it will be several years before this changes. On the positive side again, eventually CDMA will be the dominant air interface of mobile wireless, but we are probably looking at 2007 or so before this occurs with hypergrowth commencing perhaps by 2004 but probably no earlier.
The third and most significant reason I've taken QCOM down is it appears to me that they do not have architectural control of the implementation of CDMA that will probably predominate in mobile wireless.
1xEV is a wild card, and perhaps (hopefully) a very important one. Certainly QUALCOMM is betting the ranch on this one, and in this case QUALCOMM does maintain proprietary control of the architecture.
CSCO (which for the last 6 years has been 20% of my port) is now 15% as is JDSU/SDLI (and of course QCOM). I'll be starting the year with a little more balance, and a little more diversification than in the 2 previous years (which is the 4th reason I have taken QCOM down).
I should add that I initiall took QCOM down to 20% in the March/April time frame. It took itself from there to 10% this summer BUT worked its way back to 20% of its own volition.
If QUALCOMM is as good as we think it is, it could well work itself back to 20% of my port by end 2001.
As for the credibility of Dr. Jacobs, my observation after watching Qualcomm closely since 1994 is that he occasionally struggles with this.
Credibility of the CEO of a Gorilla company I invest in is most important (to me).
Credibility is very important in the community of financial analysts, and in the worldwide wireless community outside of CDG.
I am reminded of the recent "Wireless Week" article "Two Steps Forward, One Step Back" which states:
"Underpromise and overperform" weren't in their vocabulary. Credibility was strained. Some viewed CDG as an extension of Qualcomm's marketing department.
wirelessweek.com
That comment refers to CDG. The first sentence could be applied to Qualcomm, and its leader (and unfortunately it has been ... on numerous occasions ... often in unjustified fashion).
That was then (pre gorillahood). Now is now. Commercial adoption of QUALCOMM CDMA (1xMC, 1xEV-DO and eventually and most importantly 1xEV-DV) depends on great credibility, and it also requires great diplomacy.
Waving a red flag at the commercial availability or commercial viability of W-CDMA, is, at the very least, undiplomatic at this crucial juncture. I admire Dr. Irwin Jacobs and the company he built greatly, but this one pains me enough to comment on it.
IF ... W-CDMA is not "commercially available" until 2003, then Dr. Jacobs will be very credible relative to subject matter of an important slide presented at the Goldman, Sachs Internet Conference, and by his son to the Deutsche Banc Alex Brown Technology Conference.
All indicators however point to the commercially availability of 3GPP ('R99) W-CDMA in early 2002 and perhaps even late 2001. If that happens, Dr. Jacobs slide will be referenced frequently, by QCOM detractors. It is fodder for Marc Cabi's and Ed Snyder's mill.
I'm a bit torn on this one. On the one hand I'd like to see Dr. Jacobs maintain credibility. and on the other, I am anxious to see W-CDMA roll out and start the QUALCOMM meter clicking well before his "Estimated 2003" date.
- Eric - |
