Where we differ is in our analysis of QC's licensing program. With over 50 vendors, including just about anyone of merit excluding Ericsson, QC has already spread the technology far and wide. The argument that royalties represent a confiscatory barrier to competition is total baloney--there is an enormous time-to-market value, and QC's customers have been able to forstall the R&D investment necessary to reinvent the CDMA wheel. Even technologically powerful companies like MOT have strugged (look at their handset delays) when they tried to trivialize QC's intellectual property advantage.
CDMA IS being deployed in over 30 countries, and the 3G debate is much more of a marketing circus than a product introduction. ERICY would like to muddle the waters with a migration to some future standard, which it would like to monopolize rather than concede defeat to QC. I truly don't think the world will what four to five years to see whether ERICY can circumvent QC's patents and develop and equivalent product. Don't get lost in the weeds. 3G, for Europe, is not much more than a new air-interface (i.e. CDMA) spread over GSM network protocols, across a broader bandwidth. Wider bandwidth is not a panacea since it necessitates small cell sites (and more capital per unit of geographic coverage and erland of capacity). Bottom line--do people use mobile telephony to move data or for voice? 3-G seems like its optimizing for data over voice, but data is better moved over a wireline infrastructure.
Finally, it gets frustrating listening to everybody talking about QC's low margin manufacturing margins. Why do people presume that the same management team that drove Omnitrac's gross profit margins beyond 40% will perpetually drool on themselves when it comes to cellular infrastructure and handsets? (1) QC's "true" handset margins are better than they appear--but are difficult to analyze due to the Sony JV. As I've said before, you must deconsolidate the low margin Sony sales and pro forma QC's piece of the pie--if you do this, you will see margins not all that far removed from NOK's. The infrastructure business is still losing a pot-full of money, but the order backlog is building substantial momentum and you need to analyze the net present value of these infrastructure relationships before opining on the merits of the strategy.
You can spend about several hundred hours on the financials, as I have, or you can simply understand the obvious: Irwin and Harvey are two of the smartest businesspeople (note I didn't just say "engineers" although that's inclusive) that I have ever met.. Do you really think you understand their business model better than they do?
Regards,
Gregg
Sorry for the typos..I had to type this on the fly.. |
