Qdog, get serious. What does "it's too hot" mean? Your contribtuion to the thread has been too enlightened and helpful in the past to sink to the level of inane retort. I think you also misinterpret my prior message.
I believe in the company. What we need is some good information on the handset transition, and viewers of this thread should be able to give some good insight into how the transition is going. Whether, as QCOM believers we think the company will get the handsets out timely, is immaterial. Whether we like it or not the stock market is focusing on conerns about the product transition. The stock price is depressed because the street is waiting to see that the company will actually do it. The analysts were scared off because QCOM shut down production on the initial phone and has put its eggs in the basket of rolling out six new phones, including the Q. My guess is that the analysts had expected the transition to be much slower, with continuing production of the current phone for maybe another year, and switching new lines to producing new phones a few at a time over a six month or longer period of time. Qualcomm is at a critical stage, and the next six weeks are extremely important.
Now I think QCOM stopped production of the current phones due to confidence in its ability to execute and a desire to hit the market quickly in order to maintain its lead over its handset competitors. I am way long--perhaps overextended--on QCOM if there is a delay in the stock beginning to really move higher. I would like to buy some more but don't want to have to hold while the price drops--as I have been doing since March. If there is a delay in getting the handsets out, the price could drop another five points. I want to buy before it moves UP bigtime. If we can get some advance information that the company will ship its phones timely, then we can increase our positions in the stock at an advantageous time. Isn't that what the thread ought to help us do?
Coming from a background of high-end retail, I would bring out the Q-phone first (which initially will not be dual mode) and create a big advertising blitz. As the inventories on the current phone reach low level, I would bring out the replacement for the current phone. Lastly (about mid-September), I would bring out the dual mode (CDMA-analog) phone. The theory is to create a marketing blitz at the beginning with the Q, its features, and how great it is. Allow PrimeCo and Sprint a series of marketing blitzes. On the other hand, QCOM might prefer to get the dual-mode phone out first.
Despite all the focus on the Q, the dual mode phone is the important phone. The reason is that PrimeCo and Sprint will buy every dual mode phone that QPE can deliver. The only thing that the PrimeCo and Sprint competitors can say about their service is that their coverage is small and the competitors' coverage is national or the subscriber can make a call or receive a call anywhere in the continental U.S. While several of the new phones are dual mode and aimed at the cellular providers, that segment of the market is small at the present time. Most of QCOM's U.S. market for handsets is dependent on PrimeCo and Sprint PCS. They desperately need a dual-mode phone in order to counter the one disadvantage they have (coverage). They will hawk dual-mode phone up the cazoo, because it enables them to expand their growth at even higher rates than they have been able to effectuate in their first-stage rollout. The dual mode phone will automatically switch between analog and CDMA allowing the user to travel seamlessly from CDMA territory to analog territory--obtaining all the advantages of CDMA when they can take advantage of it. This is why they will buy every dual-mode handset QCOM can make. I have been told that Sprint PCS is already making deals with other providers for roaming territory servicein anticipation of being able to offer nationwide service through the dual-mode phone.
Once the phone is on the shelves, what is important is the price at which the dual-mode phone will be sold. If it is priced too high--near the Q-phone price, it seems to me that it will not allow Sprint and PrimeCo to sell it to the mass market at a price that will foster their growth. Their growth is QCOM growth; we are tied together. My guess is that Sprint, as the price leader, will wish to price the phone to the consumer significantly below the Q-phone. Because PrimeCo's service is even more restricted than Sprint's, it, too, should desire to use the dual-mode handset to offset its competitive disadvantage. Focus not on the "technology" but on the real service that a subscriber can utilize. While it is nice to talk about the Q-phone's whistles and bells (for the high-end customer who wants maximum CDMA service utilization), I think the dual-mode phone has greater potential as the "to sell" phone of choice for the PCS providers--because it solves their coverage problem and keeps their growth curve high.
In addition, the dual-mode phone helps QCOM expand the customer base for CDMA and helps down the road with the transition to next generation.
But the critical thing is to prove once again that the company's decision to close down production was not a mistake, that it can execute on manufacturing and software development-refinement for the new phones and take advantage of the market that is there--that revenues won't fall. Indeed, if the company gets the phones out, particularly the dual-mode phone--I think fall will be a BLOW OUT, and the analysts will have to go back to their original revenue and income targets or better--especially if QCOM's competitors are unable to get their phones out. But, it is not in my view, a question of what the competition can or will do, but rather whether Qualcomm can execute what it ought to do for itself and its major customers, Sprint and PrimeCo.
We need more information, and if we can get it, hopefully we can profit handsomely, because once it is apparent that things are coming along smoothly for QCOM, the street will move the stock. I'd sure like to be there BEFORE the rest of the world discovers things are likely to happen. Forgive the allusion, but we know the Q-dog is pregnant; what we don't know is whether the the puppies will be born in time for Christimas gift giving season and how many will be born or how many will be lost. Somebody out there has got to have a clue. That's what I want to know.
As to the C-block, I believe we need more information there, too. If the government does relax some of the financial constraints, it will be big boon for QCOM and ease some of the fears regarding Qualcomm, which are keeping the stock depressed. But, a handset cash cow this fall will be the biggest and most immediate boon to the stock. Thus, my desire to elicit information from those who might know something regarding the product transition.
Finally, latest news on the wireless wars. In Dallas, Sprint is now advertising its $50 a month/500 minute deal heavily, with 1500 free minutes the first month to test out the service. Apparently, the $75/1500 minute deal has expired. This amounts to an effective price increase which I predicted a week or so ago. I was in the Houston area this weekend, and PrimeCo is advertising its $50/500 minute deal. I believe this is price range where the real mass market is. (See prior post that estimates average July 1997 wireless phone bill is $45 and reasons why subscribers take or change service provider.) In Houston, GTE advertised in the Sunday paper the Sony CMD-550 phone, which is or looks exactly like the current QPE phone. |
