WIRELESS Qualcomm Plunges, Motorola Declines, Confidence Recedes ,
By Brian Deagon
Investor's Business Daily
Qualcomm Inc. attempted some damage control late Friday following comments from its chief executive that the rollout of advanced wireless technology in Europe was taking longer than expected.
In a separate announcement by another leading wireless company, Motorola Inc. surprised industry watchers with news that a sharp fall in sales could lead to its first quarterly operating loss in 15 years.
In a statement, Motorola President Robert Growney said the market was in a "recession of confidence."
On Friday, Qualcomm shares dropped 7.7%, falling 5.13 to 61.83 on nearly five times the stock's average daily trading volume. Earlier in the day, its shares had fallen as low as 50.13. Motorola shares fell 1.04, or 6%, to 16.25.
Comments by its chief executive, Irwin Jacobs, sparked Qualcomm's decline. In an interview published on the Web, site of London's Financial Times, Jacobs said European mobile phone operators weren't likely to launch an advanced version of wireless technology known as W-CDMA until late 2004 or early 2005. That would be some two years later than expected.
On Friday, however, Qualcomm said demand for its less-robust wireless technology called CDMA2000 remained strong.
Qualcomm created and licenses CDMA. The company stands to profit more on adoption of CDMA2000 rather than W-CDMA. It holds many of the key patents on CDMA2000. While it owns some W-CDMA patents, so do many other companies.
Question of Standards
W-CDMA stands for wideband-code division multiple access. It's a type of wireless interface that can work with Europe's transmission standard. In Europe, the standard isn't CDMA but instead is GSM, or global system for mobile communications.
At its San Diego headquarters, Qualcomm seemed surprised at the comments attributed to Jacobs.
Qualcomm spokeswoman Christine Trimble said "Jacob's comments made in Europe" were not available to her.
But she repeated the company's contention that the rollout of CDMA2000 is more important for Qualcomm.
"Qualcomm believes that CDMA2000 provides a more capable, spectrally efficient, timely, lower-risk and lower-cost path to all 3G services," she said.
Third-generation, or 3G, wireless applications are just starting to hit the market. Such applications include much faster, higher-qua1ity Internet access and Web-site browsing capabilities.
Qualcomm shares often decline on any news that its technology might not be embraced as fast or as widely in Europe as the company and some observers expect.
Both W-CDMA and CDMA2000 aim to make wireless communications more efficient and less costly.
Where Qua1comm licenses wireless technology; Motorola is the second-largest maker of mobile phones, behind Nokia Corp.
In a broader sense, Friday's comments from Qualcomm and Motorola suggest the market isn't yet ready for more advanced forms of wireless communications.
On one hand, consumers seem content enough with low-cost handsets. On the other, carriers are slowing new purchases, believing they overspent in 'recent years without seeing enough of a payback.
Phone Sales Slowing
"There's not enough consumer demand to drive these new technologies. There's not this sense of urgency," said Jack Kelleher, an analyst with Argus Research. " And capital spending has been drying up across the entire telecommunications sector ."
Nokia now says as few as 500 million cellphones will be bought this year , down from an earlier projection of 575 million. To get to even the lower number, many current cellphone owners would have to upgrade to new phones.
"The replacement market isn't developing as expected," said Mike Walkley, an analyst at Dain Rauscher Wessells.
An Intel Corp. executive last week said carriers have overspent on unproven next generation wireless technologies.
Speaking at a Wire-less conference in France, Intel Vice president Hans Geyer suggested the industry was heading for financial woes. Intel sells chips to telecom companies.
But for. Qualcomm, the big issue always has been Just how much will overseas markets adopt its CPMA technology.
Qualcomm's problem is that "CDMA2000 could become a technology island, an orphan, " said Jane Zweig, chief, executive of Herschel Shostek Associates. "Qualcomm's world could be getting smaller, and that may be why they're trying to alert the world to the fact that these other technologies" will be full of problems."
South Korea's government on Friday, for instance, said it would delay its scheduled rollout of CDMA2000 technology.
The Qualcomm news was compounded by Motorola's comments. Motorola's Growney said conditions include "excess inventories in the distribution channel, slowing overall market growth and an increase in pricing pressures." |
