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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 159.42-1.2%Jan 16 9:30 AM EST
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To: Art Bechhoefer who wrote (33000)3/2/2003 11:33:54 AM
From: kech  Read Replies (1) of 197244
 
Art- All we know for sure that would happen with drastically lowered royalties for 3 years is that Qualcomm earnings would also be drastically reduced. It may soon be the case that one or two former wireline companies in China (per comments by Irwin Jacobs) will go to CDMA with existing royalty arrangements. Once that happens the underlying logic of avoiding performance superiority which exists in hand (CDMA2000) compared to worse performance which isn't even available until the future (UMTS) will crumble. As far as the rump action in EDGE, maybe the competitors of CDMA2000 can try to use it to compete, but the upgrade costs (of TDMA or GSM to GPRS to EDGE) and the associated performance disadvantages will kill them eventually anyway. (See Cingular for the walking wounded). Once China goes CDMA, if I could I would rather raise royalties for the laggards rather than cut them but we can't.

I guess the major point is that Europe wouldn't switch even if royalties were zero. Probably ATT and NTT wouldn't switch even if royalties were zero. (They should ignore sunk costs per economics but they won't). The only companies on the edge are the GSM providers that haven't committed much to UMTS or EDGE. I think most of these, when faced with tough CDMA2000 competitors, will switch to GSM1X (at least in China, maybe Japan Telecom). Some in Latin America could still go TDMA to CDMA. Who knows, maybe even Cingular, unless they get some spectrum someplace else or get bought out.
Tom
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