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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: gdichaz who wrote (41146)	9/15/1999 8:48:00 AM
From: MileHigh	Read Replies (1) \| Respond to of 152472

Dell, very interesting?! hum.... MileHIgh

To: gdichaz who wrote (41146)	9/15/1999 10:52:00 AM
From: JohnG	Read Replies (1) \| Respond to of 152472

gdichaz. A few questions here. I really didn't want to see Q relinquish making its own phone. It seems like this division causes a few problems: 1) Competing with your ASIC customers can make them want to buy elsewhere. Industry pressure can be mobilized against you. 2) Margins on phones are currently much lower than on ASICS. I wonder if Q has lost Sony's purchasing clout for buying components and are now at a purchasing disadvantage. The last mfg rate figures we heard indicated that it only took a few minutes on the mfg line to knock a phone together. Thus, I postulate that total assembly cost is quite small compared to the cost of the components. I wonder if the trend is to integrate all components onto one chip a la "computer on a chip" in such a way that Q doesnt have the bredth of IP, technology, financial resources to keep up? If Q can't make decent margins on phone mfg, who can. Possibly a company with the lowest component costs that has most components made in low cost Asian plants not available to Q. 3) Margins on phones tend to get pushed down because a) they are sold to a few large telecom customers and b) consumers, especially in the US, generally go for cheap over quality and features. After all, what % of potential customers will surf the net, download to their laptop, keep elaborate calenders and phone books, do other tech geek things. No, mostly they will call their friends and talk, talk , talk. So, only say 5 to 10% of the customers will buy a PDQ and pay an extra $100 for it. 3) Loss of focus on technology due to time pressures and details of a) fast product design cycle times, b) phone and component distribtion headaches, b) sales presentations to huge customers. Suppose Q sells the phone mfg division. What is left? 1) They can continue to license and collect royalties on ASIC makers and phone makers using their technology. 2) They can focus on other markets like Wireless Local Link, where their IPR gives them a leg up. IPR here could be most valuable, but it is an uexplored market. 3) They can continue to refine and patent in the mobile phone area. Unfortunately, the capabilities of the ASICS appear to be jumping ahead of the demands of the market. They really need some killer application that creates demand for even more sophisticated ASICS. CDMA itself appears to be a killer app in that it provides superior phone clarity and connections. But there is no killer application that creats unlimited demand for the most sophisticate, next generation ASICS. So, will mobile phone operators invest in CDMA 2000 equipment wiithout seeing a market for higher data rates and sophisticated features. I doubt it--Sprnt PCS is moving fast to test that market with net browsers, net info retrieval. The problem is. what can you get on a 2" x 2" black & white phone screen. Not much is the answer. We have upgraded the color screens on our PC's from 13" to 19" color. The tiny screens on phones will seem like toys and most of up over 40 won't even be able to read them--especially if they stay black & white. The phone market is for Fords and not Mercedes. 3) I have some fear for a fabless, phoneless QCOM. Right now, I'm not too worried about this problem, but here it is. They rely on Intel and IBM for their ASIC fab. With only two or three venders for ASIC fab, they may find that they will be paying too much for ASICS in the future. This could be a problem if NOK, MOT and others perfect their ASIC fab at much lower cost than Intel and IBM charge QCOM. This is a future potential problem, but it could happen leaving Q without products and just collecting royalties on IPR. Ihis worry is very good reason to try to stop VLSI and MOT from making ASICS for sale in the merchant market. JohnG