Exactly. The initial downgrading of QCOM shares by certain analysts was predicated on a change in policy in China, which appeared to favor GSM over CDMA, notwithstanding an agreement that had been signed between China Unicom and QUALCOMM. Somewhat later in the year, when Korea announced a policy banning the discounting of domestically sold handsets, the shares of QUALCOMM, whose CDMA technology dominates digital wireless in S. Korea, took another hit. These two events, combined with analyst skepticism for virtually the entire technology sector, explain why QCOM shares are still less than half their value a year ago.
What I was trying to point out was that the policy changes in China and Korea have been resolved for the most part in favor of some flavor of CDMA. The change that has occurred over the past year has NOT been in the potential markets for CDMA but in the TIME FRAME for CDMA to become the technology of choice in those markets.
The main cause of this, in my view, is the desperate attempts by GSM and TDMA equipment providers to find some way to convince consumers that the existing technology, fortified with a few band aids, is good enough for the average consumer. In other words, they hope the average consumer finds it unnecessary to demand a high data rate for Internet access, plus other refinements that can be obtained inexpensively on CDMA systems, but require major upgrading if the same performance is to be available on GSM or TDMA.
The end result of these delaying tactics is that it is taking longer for CDMA system enhancements to translate into royalties for QUALCOMM. On the other hand, QUALCOMM has put together a family of new chips that is simply better and cheaper than the competition, and they have made so many well thought out acquisitions to complement the basic CDMA technology, that, if anything, the earnings potential is much greater now than it was a year ago.
There is a dark cloud on the horizon in the form of deteriorating U.S.-China relations, which could adversely affect QUALCOMM. If the new administration wants to make a big thing out of principles, particularly on issues such as human rights, and whether or not we should do business in countries that pay substandard wages and deprive U.S. workers of jobs, vocal criticism along those lines would result in (a) no change in China's domestic policies and (b) retaliation against the U.S. for its criticism, justifiable or not. We'll just have to wait and see, but except for that, I'm optimistic. |
