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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Caxton Rhodes who wrote (2046)	9/3/1999 2:21:00 AM
From: rosebud	Respond to of 34857

man o man do i ever agree with you.

To: Caxton Rhodes who wrote (2046)	9/3/1999 1:06:00 PM
From: tero kuittinen	Read Replies (3) \| Respond to of 34857

Let's say I agree with you 65%, OK? All three major digital standards seem to be doing OK. Qualcomm obviously has more upside potential than Nokia. But where we disagree is risk, Caxton. Q faces some pitfalls that investors have chosen to ignore until now. It may be a lot easier for Nokia to surprise than it is for Qualcomm. I don't see this as a big emotional issue - companies hardly are anyone's enemies or friends. Those have to be found in the real world. Some issues: - China is sold to American investors as a CDMA goldmine. In the meanwhile, the only conduit of CDMA into China, China Unicom, is sinking into a nightmarish internecine war with its own Western stakeholders. The IPO has been pushed from this fall into next spring. Maybe. But despite its financial problems and heavy debt-load Unicom keeps making new GSM orders and has gained access to its bigger rival's nationwide GSM network. The economics of IS-95 in China get more impossible literally every week. This winter at the very latest people will start questioning that 40 M CDMA growth projection. Remember - the first leg of that prediction was 2 million sub capacity by the end of 1999. There are now less than four months of this year left to reach that. - The absurd AT&T rumor. It won't faze institutional investors, but obviously the scam is influencing some individual investors. AT&T has been signaling its commitment to TDMA literally every week. Expanding its network purchases to Nortel and Lucent to handle the heavy new order flow. Buying a big chunk of Canada's leading TDMA operator. Building up towards this fall's major marketing push for Nokia's 8860 tri-mode phone. Consolidating its link with BT's cellular unit. Promising TDMA-GSM roaming models for next year. And now there is a methodical attempt to convince small investors that AT&T is about to switch to CDMA. Care to calculate the write-off of scrapping the existing TDMA gear, cancelling the 2 billion dollar TDMA orders from this year alone, plus suddenly switching into a standard that is incompatible with the companies you have just forged into a strategic alliance? There are several people at QCOM message boards who know for a fact that this rumor is false. But they choose to keep silent. - The importance of the handset division. I know many people like to think that QCOM is purely a licensing fee/chipset company that has the handset unit as a quirky hobby. But take a look at what proportion of annual revenue comes from the handset side. Consider that figure and tell me that Qualcomm is not a handset company. And as a handset company we're looking at a contender with 2,5% global market share and no presence outside its Northern American home base. It probably won't ever get among top eight manufacturers - let alone top five. Are the margin worries really overstated? Let's think back to those heady days of early summer. What was the handset profit margin target some Qcom exec casually dropped in an interview? Could it possibly have been 30%? Only as a possibility, of course. Not as a promise. Nothing definitive. Nevertheless, you have to have a very, very big mouth to talk about 30% in this business. Even hypothetically. When you start tantalizing Wall Street with the prospect of becoming world's most profitable handset maker you better come up with the goods. Plus there was that cool boast of trying to become the number two digital handset maker in USA by year's end. Once again, nothing concrete - just a target. But the impression created was that it will be possible for Qualcomm to beat Motorola during the second half of the year - an obviously deranged claim when you consider the success of the CDMA Startac. So I think it's pretty dangerous to project this summer's run-up for Qualcomm into the next five years - because some of the enthusiasm propelling that rise has been built on pretty dubious "targets" and "possibilities". I'm sorry we can't completely agree here. I've seen pdQ and QCP-2700: I could never love a company that manufacturers products like that. I hope you believe me when I say that I'm happy that you've picked the right strategy thus far. I just hope your exit plans are as solid as your entry points. Let's agree to disagree. Tero