Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: slacker711 who wrote (2626)	11/4/1999 5:30:00 AM
From: tero kuittinen	Read Replies (2) \| Respond to of 34857

You're right - we don't know what the absolute numbers for mobile phones shipped during the third quarter were. Not in any standard. That's why year-on-year sales growth figures that companies provide are important; they are a concrete measure of actual sales performance. I'm not sure why we should focus on unit volume. Isn't sales volume more important? Isn't the 29% chipset sales growth which you adamantly refuse to address the real point here? Actually, here's where we get to Nokia (for the benefit of the long-suffering Terrapin). One of the possible weaknesses of Nokia lies in the late entrance the company made to the CDMA handset market. Can they compete? Or is the 2-3 year advantage the Qualcomm handset unit and companies like Samsung have too big to overcome? That's a legitimate worry. And that's why these quarters are so interesting. Because now we see the actual sales situation, stripped bare of hype and spin. These are three of the points made by Q advocates last summer: - Q handset unit is healthy, profits are robust and whoever buys the division can maintain market share and ensure future orders for Qualcomm chipsets - Qualcomm chipset unit has a superior product and can maintain a dominant position - Nokia and Motorola are far behind in CDMA phone market... they desperately need Qualcomm chipsets Sound familiar, Slacker? One problem here: the reality doesn't conform to these expectations. There is no reason why Qualcomm should have sacrificed its handset profit margins so soon after new model launches... unless that was the only way they can sell those phones in a suddenly more competitive market. Independent market research shows that Qualcomm's share of North American digital phones slided already during the second quarter - before 6185 and Startac shipped in volume. That's the relevance to Nokia. The Q handset unit is spinning out of control. Sudden, precipitous fall in margins was the first clear warning sign before Motorola and Ericsson faced their own major crisis in mid-Nineties and 1998, respectively. That's how companies try to hide a loss of consumer interest - by steep price cuts. The next step is a steep fall in the sales growth. That happens when the margins are close to zero and further price cuts are impossible. Which happened around yesterday afternoon at the Q handset unit. So how "superior" are those chipsets? If they helped destroy Sony in North America and are now wrecking the profits at Qualcomm's own phone unit... how superior is that kind of a product? We've heard these "Ah'll testify!" types of comments from Qualcomm shareholders about how badly 6185 has been received in the market. And that's the lie that this and next quarter are revealing. When we get Dataquest info on third quarter market share situation we'll know more. But it's already clear where Nokia's next market share expansion is going to happen - the gains are coming from the hide of whatever hapless company buys the Q phone division. After Acer or Sanyo has acquired the division, there is the usual post-acquisition reshuffle, which is now coinciding with the current profit collapse. pdQ isn't selling, the high-end Q-phone has vanished, Thin Phones slided into the bargain bin category about four days after their debut. That's the interesting part for Nokia shareholders. Because no matter how many times mobile phone manufacturing is portrayed as "box-making" - year after year another company keeps biting the dust. Nortel, Lucent, Sony, Qualcomm... the list of companies in full or partial retreat keeps growing. Tero