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 (3760)	3/11/2000 3:32:00 PM
From: tero kuittinen	Respond to of 34857

I think the standardization power has a lot to do with Gorilla status... but there's no room for genuine disagreement on most SI threads. The best you can hope for is 5-6 messages before the debate degenerates into a slapfight. I'm not too worried about the split W-CDMA orders. Most operators are apparently going to split 3G infra orders - maybe it creates a sense of security. Yeah, I think that the US TDMA operators have now signaled pretty clearly they will go with EDGE. The timetable is open, though. There is a worry that Ericsson is going to walk away with a big majority of orders. Wouldn't we all love to see the first GPRS phones... Motorola made a pretty dramatic announcement of shipping GPRS handsets during the summer. Let's see when the slippage starts. Tero

To: slacker711 who wrote (3760)	3/13/2000 9:02:00 PM
From: slacker711	Respond to of 34857

A great post by Mr. Fun on the G&K thread (I wonder if I can get a bumper sticker saying Qualcomm MONOMANIAC ;-)). To: tero kuittinen who wrote (19881) From: Mr.Fun Monday, March 13, 2000 4:56 PM ET Reply # of 20090 Greetings G&K thread denizens. Having witnessed Tero's long-standing abuse on the Nokia thread by the monomaniacal QCOM crowd, I can understand his over-sensitivity (some might say paranoia) here. In any case, while I have some major quibbles with the manual, I would posit that Nokia fits the bill better than some other favorites. Some observations: 1. The market where Nokia is a gorilla is not wireless infrastructure, where the landscape is marked by technologically distinct kingdoms, but in handsets. 2. However, Nokia's status as Gorilla is not on the basis of transmission technology (CDMAOne vs. GSM vs. IS-136 TDMA, etc.) rather it is on process technology and user software. Nokia's handset dominance cuts across transmission technology, precisely because those standardized technologies offer no real opportunity to differentiate. 3. Rather, Nokia's differentiation (and BTE) is based on several interlocking and powerful market mechanisms that reward the strong and punish the weak. 4. First, Nokia has an internal design process that lets them deliver a wider array of new products more quickly than any of its competitors. Included in this overarching process strength are key technical strengths in industrial design, miniturization, power control/battery design, user interface software, display technology, etc. that are essentially impossible for competitors to match. 5. The net result is not only superior products, but also extraordinary customer loyalty. Nokia loyalty tests off the scale, THE key in a market where buying cycles are becoming shorter and shorter. It also means Nokia earns a price premium. 6. Furthermore, because of the alphabet soup of wireless standards, it is difficult to stay competitive as a single technology specialist. Nokia leverages its product designs across multiple frequency and technology platforms. Nokia can change its manufacturing lines to turn out different forms of its phones in minutes - everyone else takes hours. This is a product of design excellence, experience and manufacturing sophistication. 7. This is also why it is very likely that Nokia will gain the leadership position in CDMA handsets (where it was clearly late to identify the market) whether or not it decides to buy QCOM chipsets. It has better designed phones, customer loyalty, and lower costs. This is not unlike Cisco's late entry into Layer3 switching 18 months late - many thought Extreme, Foundry and Alteon would be able to hold them off. NOT. 8. Finally, Nokia enjoys enormous economies of scale. Not only can it command better prices from its suppliers, but it also gets assured supply in a market rife with component shortages. 9. I believe Nokia's advantages in the hot wireless device market add up to the low risk/high return opportunity that is at the heart of Gorilla designation. It is evident in Nokia's handset operating margins, which at nearly 25% are 4 times higher than any other competitor (5 times if you don't count Motorola). For the reasons outlined above, I believe these returns are sustainable. 10. In contrast, (and in the spirit of controversy) I would question JDSU's inclusion as a king. It is enjoying a market of extraordinary demand. It can sell everything it makes. It can charge almost as much as it wants. It is growing at an astounding pace and earning extremely high margins. However, for almost every part JDSU makes for almost every customer, there is a second or even third source. In fact, its two largest customers LU and NT are two of its best competitors. EVERY supplier in the market is adding capacity at a breakneck pace (NT and LU are more than tripling capacity). Eventually, capacity WILL catch up to demand - then, where is the differentiation? what will happen to prices and margins? JDSU is a great investment, a leading player in perhaps the hottest part of the high tech landscape. But I posit that it is in fact a king, not a gorilla.