If three years seems like a long time to you, I'll end this missive with a quote from my write-up on in 1999 that Cha2, Frank and a few others like to celebrate: "It's truely hard to know how fast Qualcomm will grow in the next five years but most people seem to be thinking it will be at or in excess of 50% annually. My thinking is to look at the next five years as a blip in time and, instead, look at the next fifteen."
Twelve more years to go.
Well another quarterly earnings report has come and gone....and while much of the earnings report is generally just background noise for a Gorilla Gamer, I think there were some points that are worth highlighting. Most of the reports concentrated on the Korean subsidy ban....but this is probably a one quarter effect at most.
I think the key question (which you raised) is the progress of the wireless data tornado. I have always viewed the tornadoes in wireless a little differently than in other industries....more as separate national tornadoes than one worldwide one. I think the tornado is well underway in Korea while we will have to wait and see in the US. Unfortunately, there isnt a clean way to measure the data tornado as there was for voice....but by any measure I think the winds are blowing in Korea.
Korea ended the quarter with 7.35 million total 1x subscribers....net additions for the quarter were over 4 million 1x subscribers. A more telling statistic may be the data ARPU that is being seen. Paul Jacobs gave the most recent statistics for BREW users from KT Freetel. They now have over 500,000 BREW users (up from 188,000 on Feb. 13th). These users are generating data ARPU 6 times their 2G counterparts. Absolutely amazing.
I have always thought that BREW (and gpsONE) were classic Gorilla Game plays. It looks like a page straight from the MSFT/INTC playbook. Just like those two grabbed more and more of the value inside a computer, Qualcomm is trying to do the same inside a handset. During the past quarter, KDDI and Verizon both launched BREW....the more successful these launches are, the more leverage Qualcomm will have over their value chain. I am looking forward to the day that Nokia comes out with a CDMA handset that offers both gpsONE and BREW <g>.
Outside of Korea and Japan, I think we are going to have to wait until Christmas to see how much traction wireless data gets. PCS's launch of 1x this summer will be crucial.
On another front....IJ reiterated his prediction that W-CDMA wont see widespread adoption until 2004/5. There was no comment on W-CDMA infrastucture royalties which I would have thought should have started flowing by now. I have begun to wonder if Qualcomm will ever see significant amounts of W-CDMA infrastructure royalties.
More positively, Qualcomm signed up two new unnamed customers for their W-CDMA chipset. The total number of customers is now five. While I think it is unlikely that Qualcomm will be able to duplicate their dominance of IS-95 with W-CDMA, I think it is becoming increasingly possible that Qualcomm will see a significant marketshare (>30%). The problem is one of timing. For Qualcomm to resume the heady growth of the late '90's they will need to see W-CDMA become a success. September 26th (Nokia's launch) has become a key date for Qualcomm investors.
A couple of other developments....
- GSM 1x is seeing interest in Asia. IJ specifically commented that GSM operators that didnt have spectrum in the 2GHz band were considering GSM 1x.
- The ZIF handsets are expected to hit the market in the late 4th quarter or early first quarter. This should help growth in low-income countries.
- An interesting trend from the Leap Wireless conference call (the spin-off from Qualcomm). They are seeing 30% of their customers completely dropping their landline in favor of their wireless handset. While the industry has hit the skids, I think that this is a good sign for the future.
Hmmmm....as usual, my thoughts tend to be a little scatterbrained. For those who read through it all, any comments are appreciated.
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