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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 159.42

-1.2%

Jan 16 3:59 PM EST

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To: limtex who wrote (8279)	2/9/1998 5:12:00 PM
From: tero kuittinen	Read Replies (2) of 152472

Handsets have been predicted of becoming commodities for eight years now. Hasn't happened. The profit margin squeeze you refer to has not taken place in GSM business: witness the actually climbing profit margins of Ericsson and Nokia in their most recent quarters. If profit margins are now in decline in Qualcomm's CDMA handheld business this is a company problem. The same thing happened to Motorola when it lost the competitive edge in GSM field. Leading manufacturers are not experiencing profit margin decline, because they are able to add value and squeeze the maximum advantage out of economies of scale. You are right about Startac selling badly in Europe. Motorola is in serious trouble here. However, other expensive models are very successful. Call charge on my digital phone is 15 US cents a minute. Perhaps this is what you consider prohibitively expensive. About aggressive US marketing... visit Scandinavia some day and try to walk one block or read two pages of any newspaper without being visually assaulted by mobile advertising. If a company doesn't have a significant global market share its handset business may very well be non-profitable. This can be a major problem, if the said company has nevertheless poured megabucks into handheld R&D and advertising. You can have a company based on creating and licensing technology. And you can have a company doing the creating and manufacturing. But if you have a company that tries to do both and fails at manufacturing the Wall Street will get antsy. I'm not sure how this is pertinent, but to answer your question: it is projected that in 1998 about 1 million digital handsets will be sold in Finland (population: 5 million) and Nokia currently holds about 65 % market share. It's kind of interesting how often people in this thread refer to the "saturated" European market place. While in Finland, where the market penetration of mobile phones will hit 50% this year the shipments of mobile phones went up 250% in January 1998. The rest of the Europe is projected to follow. It is now expected that market penetration will reach 80% before sales start to plateau. This is why the reign of GSM in Europe is such an important factor in determining the ultimate global success any mobile company or standard. Tero

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