Thanks for the reference to the H&Q research report on Nokia. I read all 42 pages of this rather pessimistic take on Nokia prospects for the next two years – with a neutral rating and price target of $23. It’s that time of the year when the analysts speculate on the future while lacking any good data to validate their views – especially as we’re on the verge of a recovery from a recession and on the verge of big changes in wireless technology. H&Q’s pessimistic view is based on the following assumptions;
1. Global handset growth has peaked and will not recover strongly in the next two years
2. GPRS take-up will be slow over the next two years; IXRTT growth great
3. CDMA growth is going to accelerate with respect to GSM and TDMA.
They wouldn’t be just a bit biased based on the fact that they make a market in Qualcomm and have a buy rating on it, would they? Some interesting points to ponder:
 They forecast an overall 2002 growth in handset sales of a meager 5% - but project CDMA sales to grow by 15%. They show huge growth for 1X sales – 42 million units, while projecting “tepid” GPRS sales of a mere 47 million units. An interesting horse race!
 They don’t expect handset replacement sales to rebound much following the recession: (despite the intro of new products and technology),
 Average % replacement upgrade sales – 41.5% in 98/99; 20% in 00/01; 27% in 02/03.
 They forecast a drastic slowdown in GSM handset sales – Annual sales growth averaged 96.6% in 98/99; expected average annual growth of 16.4% in 00/01; forecasted average annual growth of 9.4% in 02/03.
 CDMA does better – averaged 160% annual sales growth in 98/99 (from a much smaller base); expected 30.6% annual growth in 00/01; forecasted rebound to 13.8% in 02/03.
 TDMA looks bleak – 158%/year in 98/99; 31.7%/year in 00/01; a negative 5%/year in 02/03.
 And their forecasted split of handset sales looks like this – in the year 2000, GSM with 72%; CDMA with 17.1%; and TDMA with 10.9%. Actual year 2001 data are incomplete. Year 2002 forecast is GSM with 65.6%; CDMA with 23.3%; and tale dragger TDMA with only 11.1%. How does this square with your message number 1845 on 12/16, which talked about TDMA outgrowing CDMA through the third quarter of 2001? And concerns over CDMA growth problems with Verizon, Sprint, Japan and Korea?
 Another way of looking at relative growth – in 98/99, GSM + TDMA handset sales were 4.9 times CDMA sales. In 00/01, H&Q data shows GSM + TDMA sales at 4.3 times CDMA sales. Their forecast for 02/03 shows GSM + TDMA sales as only 3.2 times CDMA sales. At this rate, CDMA sales will probably equal those of GSM + TDMA in another 5 years or so! Oh worry, worry, worry!
Sisuman |
