To: Clark
"Now that Qualcomm no longer supplies infrastructure equipment, what the heck is vendor financing?"
You may recall that Q had to finance some of the Sprint PCS handsets in order to help out with a cash flow problem at Sprint. When an operator starts a new CDMA business, cash flow may be insufficient to cover the cost of phones, service, accounting, etc., until at least several thousand new subscribers have joined. That to me is what vendor financing is about. It helps get the stuff out to the customer quicker.
In general, this deal with Ericsson should help Q grow faster than before because it allows access to the European market. In the end, CDMA will become the system of choice, and Irwin and Viterbi will be seen as a sort of combination of the best of Intel and IBM. Who are the losers? Motorola - paid a lot of money to get infrastructure and other CDMA technology, but still has performance and profit problems. AT&T bet on the wrong digital wireless technology, but, oh well, money is no problem to them. They just floated $8 billion in bonds, and heck, the interest payments are tax deductible, meaning that the rest of us make up for the tax subsidy. Q can now concentrate on expanding penetration of CDMA both at home and throughout the world. Plenty of markets for ASICS chips, handsets, etc. I also believe that the combination of Q and E will put a lot of pressure on Nokia. If I held Nokia shares, I would sell immediately and buy QCOM. |
