Adviser Soapbox
Qualcomm Still Rules Wireless Roost
George Gilder and Charlie Burger, Gilder Technology Report 09.07.06
GREAT BARRINGTON, Mass. - While I was away, wireless analyst Andy Seybold and a chorus of others propagated the conclusion that wireless has entered a new era. Technology doesn't matter any more. It's all software and content.
Although Seybold does not say it, the implication is that the industry is moving beyond Qualcomm's (nasdaq: QCOM - news - people ) strengths. Texas Instruments (nyse: TXN - news - people ) tout Jim Faulkner opined that the Qualcomm has even lost its technical edge. Others presented indications that "CDMA" (code-division multiple access) has fallen hopelessly behind "GSM" (global system for mobile) in the "Second World," from India to Brazil. Widespread was the view that with Sprint Nextel (nyse: S - news - people ) and Korea turning toward WiMax (worldwide interoperability for microwave access), the Intel (nasdaq: INTC - news - people ) technology was usurping 3G and obviating much of the Qualcomm edge for future generations.
Although GSM retains some 80% of the global market in units and may still be making gains at the low end, GSM still entails WCDMA (wideband-CDMA) for the next generation. Wherever you look for the next GSM generation, Qualcomm is all over it. That's why Q's rivals are afraid of the future and want to perpetuate their current Indian summer with retarded technologies and FUD (fear, uncertainty, and doubt) suits at the International Trade Commission.
As new Qualcomm strategic chief Jeff Belk told me, he reread his old "Why Max?" paper and it rang truer than ever. Mobile WiMax is still way behind the Qualcomm roadmap and is not closing ground. In its WiBro (broadband wireless) form, it is still experimental in Korea and does not offer any superior features unless you can lavish bandwidth on it.
Since such bandwidth is not available in any single band on a global basis, WiMax will have to adapt to many different conditions, with many different antennas and customized chipsets. The idea that WiMax is exempt from intellectual property issues is simply false. Estimates of 2% royalties are way premature, with Qualcomm, Motorola (nyse: MOT - news - people ) and Nokia (nyse: NOK - news - people ), among others, still to be heard from.
Meanwhile, Q's edge on companies such as Texas Instruments remains intact. Though Intel and TI are integrated device manufacturers investing billions annually in new wafer fabs, Qualcomm has been able to maintain generally lower costs by farming out production of their leading edge designs to foundries -- such as Taiwan Semiconductor (nyse: TSM - news - people ), Chartered Semiconductor (nasdaq: CHRT - news - people ) and IBM (nyse: IBM - news - people )--and moving to the next node (now 65 nanometers) whenever costs dictate.
The supposed Qualcomm default in "digital RF" is entirely fictional, as Qualcomm has moved to all CMOS (complementary metal oxide semiconductor) integrated devices before TI, and RF is intrinsically analog on the front end.
Meanwhile, the Q is on track to increase its revenues more than 30% this year. Fiscal year 2005 revenues were $5.67 billion, while as of July 19, fiscal year 2006 guidance was for $7.4 billion--$7.5 billion (or growth of 30%-32% year-over-year) and MSM (mobile station modem modules, mostly in single packages) in fiscal '05 were 151 million, while fourth quarter '06 guidance was on a run rate of some 230 million--up nearly 60%.
Qualcomm's BREW (binary runtime environment for wireless) is a huge untold story that I will tell at another time. Suffice it to say that Q is becoming a software titan. This is not a declining company. |
