>Qualcomm, Motorola, Loral Space, Globalstar, Iridium, et al present very
>attractive investments for years to come. Do you agree with this and how
>do they compare with a pure Wind investment?
First a little background. At present, total telecommunications traffic is roughly 80% voice and 20% data. Colin Williams, head of WorldCom's international operations was quoted in the Economist recently that he expects that ratio to be reversed in the next six years. The Economist also quoted Mr. Cerf of MCI, "During the latter half of the next decade, there will be a new driver: billions of devices attached to the Internet. As a result, the voice call that is now the mainstay of the telephone business may one day become a small, specialist activity, perhaps thrown in for nothing along with other services." (We know these devices as EID's, and expect VxWorks to be the intelligence in the lion's share of them.)
The Economist article questioned what the Internet would do to the telephone industry. It said, "Probably, it [the telephone industry] will gradually assume the structure of the Internet, where the construction and management of the network is largely separate from the services sold over it. If that happens, the carriage of data will become a commodity business, like the carriage of electricity or freight."
Using packet-switched Internet Protocol, in time most communications links can be expected to be mere cogs in a gigantic web of interconnected communications. Copper wire, fiber optics, WLL, xDSL, Cable, Electric Power Communications, Microwave, PCS and high and low elevation satellite communication systems are all simply parts of the expanded Internet. That is why Embedded Internet Devices (EIDs) is such a really big deal. The Internet provides a near-zero-cost connection between any two points on earth, except for the so-called "last mile", the local connection on either end. Wireless communications (in particular, WLL, PCS and LEO satellites) paper over the last mile to make communications using the Internet Protocol ubiquitous from anywhere to anywhere on earth.
Try to fathom the tectonic forces pushing and shoving the telecommunications industry, now and over the next several decades. Global deregulation, commoditization and technological revolution all happening at the same time in an industry is that is vastly bigger than the sizable computer industry. Fortunes will be made and lost in a blink of an eye, and with almost no one able to fathom even the range of possible outcomes, not to mention guessing the ones that succeed.
For these reasons, my policy is to avoid all ISP and telephone (communication) operating companies like the plague. These include LEO satellite system operators like GobalStar, Iridium, Orbital Sciences, and next decade's Teledesic from the Microsoft venture. It also includes all PCS, WLL, RBOCs and long distance carriers, cable and direct TV companies. Loral mainly is a military defense play, not communications, and anyway the company was acquired recently.
On the other hand, as I have indicated on previous postings, as a communications equipment manufacturer and visionary, QCOM has carved out an neat little CDMA franchise that has barriers to entry that should withstand both competitors and time for many years to come.
Without doubt, Motorola will benefit from supplying equipment to wireless operators, CDMA, TDMA (GSM) and even analog. However, properly translating that growing business into robust estimates of top-line and earnings growth for a $28 billion company is beyond most outsiders' abilities. Assessment is especially difficult since MOT has been inexcusably slow to market with CDMA handsets, spending time and energy instead throwing insults and law suits at QCOM.
Any and all the companies you mentioned may end up winners in the telecommunications turmoil that is brewing. But "may" is not good enough for the serious investor. QCOM seems nearly certain to be a winner. But the company that is best positioned to benefit from an Internet explosion involving billions of devices, with hundreds of thousands of designs made practical by the coming ubiquity of wireless communications, is WIND.
Allen |
