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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 171.55

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To: SKIP PAUL who wrote (25403)	3/28/1999 2:34:00 PM
From: kech	Read Replies (2) of 152472

Skip - Why would ERICY spend money on developing WCDMA when it is going to end up costing them the same in royalties as CDMA2000? They would be better off in Developing CDMA2000 further and getting paid for value added. In the long run ERICY might lower total installation costs for its subscriber base to just build CDMAOne. But as Clark pointed out, ERICY doesn't give a damm about efficiency, especially in the long term. What it cares about is market share. Right now it and GSM dominates infrastructure buildouts in Europe. If it can convince European service providers that W-CDMA is more "user friendly" for GSM than CDMAOne. Then its purchase of QCOM infrastructure allows it to do two things which essentially means it gets to have its cake and eat it too: 1) Hang on to European market and ROW (rest of World) GSM market share while essentially foreclosing exclusive CDMA2000 suppliers from making in roads. 2) Try to compete in the current CDMAOne markets with the Q's infrastructure. The marketing strategy is as follows: To do this, it promises GSM companies that W-CDMA will be here soon, maybe by the end of this year. It claims that the patent resolution issue allows it to speed up this development. Of course we know it will still take 1.5 to 2 years.) It also promises that W-CDMA is "tuned" for GSM subscriber base. (Key question here - Is W-CDMA in any way technically better for GSM overlay than CDMAOne)? The fact that ERICY is going ahead with a W-CDMA standard means that it doesn't have to do much at all to "develop" W-CDMA. It just bought the essential parts and can license and pay royalties for the rest. But it can make it just enough different through the different modes that are being negotiated, to make it difficult for a frontal assault on Europe with CDMAOne today. At the very least it wants to be a player in installing CDMA in a couple of years when it is ready - not today. At that time it will be ready with WCDMA and will get the lions share of the market instead of sucking wind now against CDMAOne overlay installs that promise upgradeability. Does this answer the question "Why would ERICY spend money developing WCDMA"? It doesn't have to spend much. They will get the return from CDMA2000 by selling it to everyone else besides Europe and the GSM world and they will use Qualcomm's infrastructure group to make WCDMA as well. Most importantly, this guarantees that they get a return on their real asset - which is the installed base of GSM around the world. After all, why else are they negotiating to maintain a W-CDMA version?

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