Tero:
You seem to be mixing lots of metaphors and resorting to really untoward hyperbole here. Qualcomm remains capacity constrained and the CDMA subscribers numbers out of Sprint, PrimeCo, Airtouch (and the rest of the domestic CDMA crowd) are accelerating fairly dramatically. Moreover, your declaration of "victory" in China seems to be strikingly premature, particularly since you seen to be thinking in two year increments.
From QC's perspective, the next two years while easily be driven by CDMA's success is dozens of countries around the world (including China). While Nokia does seem to be on a roll today, you seem to be awfully sanguine about a future that involves a fairly material technology transition. For example, look at the devastation at Motorola, due in no little part, to its failure to replace its collapsing analog phone revenues with digital products. Both Ericsson and Nokia will have to face an air-interface transition which may result in collapsing prices, revenue and profits for their core TDMA-based GSM businesses. That's really the bottom line to the current "war" between QC and Ericsson. Strong current results will mean little if Wall Street becomes fixated on a technology transition circa 2001.
Moreover, you continue to labor under the belief that this is a winner-take-all situation; where GSM success means oblivion for IS-95 and vice-versa. Such strikes me as very short-sighted. CDMA is looking increasingly dominant in North America and is gaining share in South America and Asia. Japan, today, is a larger cellular market than China and while I do see a Japanese CDMA deployment, I do not see any GSM. Moreover, you seem not to calibrate the economic deltas given Qualcomm's size relative to its markets versus ERICY/NOK's. Let me expand. Right now, Ericsson and Nokia's combined stock market equity value is roughly $90 billion. Qualcomm's equity value is just $4.2 billion. Given that differential, ERICY/NOK had BETTER be winning lots of business in China (and elsewhere) or you would be in very, very dire trouble. In contrast, QC's profit opportunity in the America's, Asia and Australia strikes me as substantially superior when considered vis-a-vis its market capitalization.
QC enjoys a royalty on all mobile CDMA infrastructure and handset sales AND this royalty is will expand as CDMA grows in general and accelerate as GSM moves to a CDMA-based air-interface in particular. So, while Nokia and Ericsson face a dogfight for marketshare coupled with a technology transition, Qualcomm is positioned to enjoy expanded worldwide marketshare for its core technology, a rapidly-accelerated royalty stream and a broadened marketplace for its handsets and infrastructure.
Nokia is a fine company..but the valuation differential between just two of the GSM players and QC suggests strongly to me that the latter may prove to be the superior investment over the next three-to-five years.
Best regards,
Gregg |
