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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Ruffian who wrote (11929)	12/3/1999 11:51:00 PM
From: Mike Buckley	Read Replies (3) \| Respond to of 54805

Ruff, Feel free to copy this post back to always_saturday or invite him/her over for a debate. Nah, forget the debate because we've gone through the most important of these issues in the past ad nauseum. Be glad you posted this on a Friday night when Lindy is probably dancing; I'll try to be kind and gentle in my response. :) The writer's first mistake is with regard to the issue that the standard is supposedly being controlled by a committee. It's easy to get confused about that, but it is still a big, big mistake. First, there is not just one committee involved. There are a couple of them. Neither one of them determined the specs of the standard and told companies to produce products meeting those specs. (Okay, that happened to a certain extent but with CDMA that's is not the essence of what happeened.) Instead, the committees accepted CDMA as part of the 3G standard. They did that because they were under pressure from the players in the wireless marketplace to do so because so many companies (Qualcomm's value chain) had already made investments in the technology and/or saw that their way to future profits was to begin making those investments. In summary, the value chain formed and in so doing the industry adopted CDMA as the standard in a free-market system after which the committees put their Good Housekeeping Seal of Approval on it. That should not be confused with a committee controlling the standard. Qualcomm controls the technololgy which became the standard adopted by profit-making businesses, and that is exactly why Ericsson caved. The writer mentions control of the value chain. I think s/he misunderstands the concept of the value chain. A gorilla doesn't control the value chain. Instead, members of the value chain support, nurture, and do everything reasonably possible to ensure the success of the gorilla for one very selfish reason: doing so ensures the success of those in the value chain. The interesting contrast is that though gorillas control competitors by keeping them off balance, the open nature of a gorilla's technology ensures the success of the value chain. The value chain is the entity whose sole purpose in life (from the gorilla's point of view) is to make the certain gorilla enjoys a very long life. That's why the CDMA architecture is made available to anyone and everyone that wants to pony up and support it as the standard. All of the above paragraph leads up to his/her statement that Q can become the gorilla by acquiring companies and becoming rich enough to control the value chain. The idea of becoming a gorilla by controlling the value chain is off base. That's simply not how gorilla games work -- excuse me -- that's not how they are played. When the writer sez that Nokia, Ericsson and Motorola won't be playing chimp games, I'm not sure what s/he means. I think s/he is alluding to the idea that the three companies won't settle for a chimp role. Where the writer is missing the boat is that s/he doesn't understand that, insofar as CDMA is concerned, they are thrilled to play a royalty game. THAT is because Qualcomm already has a lock on the gorilla part of the game; the royalty play is the only option available to them. One of them hopes to become the King, but we who invest in Qualcomm really don't care if all of 'em remain princes or one of them becomes the King. I realize that our esteemed Jean shares the writer's concern that Qualcomm is ultimately going to suffer the long-term negative effects of having sucked its customers dry by requiring royalties. As I see it, the same thinking would cause people to be concerned about Intel or Microsoft sucking its customers dry by requiring licenses. The more I see Qualcomm's model move toward Intel's model, the more I think the change in my pocket is going to be jingling louder and louder. Last (aren't ya glad!), the writer asserts that the tornado has not yet begun. Tell him/her to review my posts that show the quarterly growth of worldwide CDMA subscribers from virtually every angle, or tell him/her to review the numbers at the CDMA Group web site. If s/he still insists the tornado has not been in progress since at least April 1, 1998, I really have no basis for a continued discussion of any of this fundamental stuff. There aren't a lot of things in black-and-white when it comes to gorilla gaming, but the tornado-like growth of CDMA is one of them. Uh oh. My above point wasn't the last one. The upcoming one is. S/he says Qualcomm is not yet a gorilla. I can only counter with my opinion that about one year after the tornado began, Ericsson caved. That was the defining event which caused most of us to bow on our knees whilst King Arthur put the crown on Qualcomm's head. My opinion. Did I forget to say that? :) --Mike Buckley