The ultimate battlefield? China!
If I'd had any idea when I entered Qualcomm seriously last November that the focus of the mid-term future of both my IRA and Qualcomm would come down to international geo-political-economic warfare in China, I would have abdicated that situation entirely. Tiananmen Square is etched in my mind for eternity!
High stakes poker at the top level is taking place right now. The chips (pardon the pun) are being played by politicians and businessmen with their entire futures on the line. These chips are now on tables in Washington, Paris, Helsinki, Beijing, and, most importantly, in our beloved San Diego. Who is the most intelligent of the poker players? Dr. Irwin Jacobs! He may sound like an engineer. He may not come across as a great PR guy on television. But the man is a genius and he is aware that China is going to become an international microcosm testing ground. Thank God CDMA's principal inroads have been made in Korea.
All frivolous SI-poster skirmishes aside, Maurice Winn really understands how all this is going to play out. I, like him, am placing my bets on Dr. Jacobs. We Qualcomm investors probably will not benefit in the short-term (maybe not even in the mid-term) from this poker game. But in the long-term, Jacobs' patience and expertise will cause China (and, most likely, Nokia) to "see the light."
The real problem, as I see it, unfortunately, is that the weakest minds at the poker table right now are United States politicians. The feebleness of Greenspan (and how he's influenced by an unenlightened crew of lightweights on the FOMC) is the least of our concerns currently. Clinton is a lame duck with a strange mind. We can't bank on him. Then, to make matters worse, we are dealing with the two weakest intellectuals who have run for President of the United States in all of our lifetimes. In addition, much of the game will be played out at a vulnerable time when political power is in flux here in our country.
Sorry for sounding melodramatic. But Jacobs is fighting this battle alone now in the United States. Our government is filled with lightweights and Wall Street seems to be influenced too strongly by GSM-type forces.
I am no longer pinning my hopes on this battle resolving either the financial future of Qualcomm or the financial future of my IRA positively in the short-term. Maybe not even in the mid-term. But long-term? Yes!
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Message 13787455
To: Ruffian who wrote (10850)
From: Maurice Winn Saturday, May 27, 2000 1:02 AM ET
SI: The New Qualcomm?a S&P 500 company (#10853)
Blah, blah, blah, blah ... Zhu, Hu, Wu, Zhongxing...
Will they? Won't they?
We know what spectrum is worth in uncrowded UK. Guess what it's worth in China! Yes, CDMA takes the same erlang/bushell there as in the UK where it is far less crowded, making pressure on spectrum in China much greater.
We know that 3G will be CDMA.
I know from seeing their maths and science results here that there are one or two Chinese who know the difference between a wave function and photon phragmentation. So we can conclude they are NOT technically bamboozled by the orthogonal concatenation stuff. They KNOW how many photons they can squeeze into the Great Hall of the People.
That's about all we need to know to know that they will be installing a LOT of CDMA equipment. So it's just a matter of when they are squeezed up against busy signals.
We can just relax, sit back, and wait for them to pay a fair and reasonable rate like everyone else for Q!'s wonderful creation. They'll hiss and roar, threaten, promise and cajole. Tease, lie and suggest this that and the other. In the end, they'll buy.
They'll expand their existing GSM because that's the sensible thing to do for now, then when the time is right, they'll bring on CDMA. I suspect Unicom will be wanting to do it sooner rather than later. There is no future in GSM when the spectrum cost per megabyte is compared with that from HDR and CDMA. We KNOW from the UK just how important spectrum cost will be. China's geeks can figure that out too.
They've got Korean companies busting to do business in China. Japan is into CDMA.
It's amazing how often investors in Q! have been stampeded into absurd sell-offs by one scare after another. While they were selling, CDMA kept right on gaining ground, through the Asian Contagion and disappearance of Korea off the edge of the world [if we listened to a lot of people who know these things].
Meanwhile, ex-FCC boss Reed Hundt joined the absurd idea that high spectrum costs suppress innovation. Quite the contrary. Scarcity and high costs drive innovation. It becomes essential to squeeze every photon possible through a channel. That was the driving force for CDMA in the first place. That means highly sophisticated CDMA and lots of R&D. High costs mean early and urgent buildout to get early returns.
Enjoy the shopping expedition for Q! stock folks. It won't last long.
Mqurice
PS: See Ramsey, CDMA is now more politics than silicon/germanium/gallium. Politics counts.
$62 May 2000...who'd have thought it?
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Sure, Qualcomm's decline is looking serious. We will always have Ed Snyder's pessimistic outlook. But I personally think Cena has a more sensible viewpoint regarding the future. Qualcomm's technology is too good and important to go the way of Betamax. International cell phone technology and internet access is much more significant than television/VCR viewing quality. So long as Qualcomm has established inroads in the United States, Japan, Korea, Australia, and Latin America, quality will win out. Unfortunately, probably not in the short- or mid-term.
I see the UK as being the eventual European battleground. They have never toed the line with the rest of Europe and they are much more influenced by the United States government.
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Message 13788395
To: Ruffian who wrote (10886)
From: LBstocks Saturday, May 27, 2000 12:54 PM ET
SI: The New Qualcomm?a S&P 500 company (#10889)
SMARTMONEY.COM: Qualcomm's Skid is Getting Serious
Dow Jones News Service ~ May 26, 2000 ~ 7:15 pm EST
By Christopher O'Connor
NEW YORK (Dow Jones)--Wireless-technology juggernaut Qualcomm (QCOM) continued its painful slide Friday amid uncertainty over its business prospects in crucial Asian markets.
While analysts publicly disagreed on the San Diego company's prospects, investors don't seem to care about the debate - they're running away from the stock in droves.
Qualcomm's share price dropped another 4% to $66.06 Friday. It has fallen for eight days straight, shaving a total of 40% off the erstwhile high-flier's market value.
The latest bad news started earlier this week when South Korea said it will stop subsidizing cellular-phone companies in June. That move could drive up the cost of a Qualcomm phone in that fast-growing wireless market by as much as $ 179, one analysts said.
Then on Thursday, The Wall Street Journal reported that a planned deal for Qualcomm to supply phones and transmission technology to one of China's two biggest cell-phone service providers might fall through.
The double-dose of bad news accelerated a slide in the stock that really began around New Year's after the stock hit a split adjusted 52-week high of $200 a share. Since then, it has dropped a chilling 67%. But if you were lucky enough to have bought the stock a year ago instead of six months ago, you'd still be 150% ahead. The price stood at a split-adjusted $24 last May.
Indeed, the stock burned so brightly last year (up more than 2000%) that it's no surprise it's one of the most spectacular losers in the current tech fizzle. Nevertheless, many continue to believe that Qualcomm's code division multiple access, or CDMA, wireless technology will dominate the next generation of high- speed wireless data transmission.
Most experts agree that CDMA, for which Qualcomm owns the patents, offers clearer sound quality than older technologies. It also can handle a larger number of users over the same radio frequencies and allows for longer battery life and protection against eavesdropping.
In the short term, however, there are plenty of questions. South Korea is important for Qualcomm because it makes up about 40% of the world's market for CDMA phones. That large chunk of market share and the effect the loss of the subsidies might have on Qualcomm's profits worried Chase H&Q's Edward Snyder and Credit Suisse First Boston's Marc Cabi. Each analyst issued a cautionary research note on the company Thursday.
Snyder said the lack of subsidies could be enough to significantly retard subscriber growth there. Cabi said cell phones have penetrated South Korea so much - almost 60% of Koreans own one - that a slowdown in CDMA-phone sales might be inevitable anyway, adding to Qualcomm's problems.
"We believe this slowdown could offset some of the stronger growth being seen in the United States, Latin America and Japan," Cabi wrote.
The situation in China is unpredictable, the analysts said. Qualcomm has a licensing deal with the state-owned China United Telecommunications. (Unicom for short) to create a CDMA phone system in China, the world's third-largest mobile- phone market. But The Wall Street Journal reported Thursday that the deal may be in jeopardy due to indecision by Unicom.
Cabi and Snyder added that a competing technology known as the global system for mobile communications (GSM), has a healthy head start on CDMA in China even if the deal doesn't dissolve. "In any case, even once deployment begins, significant revenue for Qualcomm would be at least 12 months away," Snyder said.
Alex Cena of Salomon Smith Barney offered a much more sanguine view of Qualcomm today, although few seemed to be listening. He doubted that the China and South Korea developments would have any significant effect on profits and he saw this week's stock decline as an overreaction by investors.
"We would be buying at these (current) levels given our continued belief that the long-term fundamentals for both Qualcomm and the wireless industry remain intact," he said.
First of all, the uncertainty of the Chinese business has long been known, he said, declaring "No one in their right mind would include China in their forecasts." He added that the passage by the U.S. House of Representatives of a bill normalizing trade relations with China is an important step to convince the Chinese government to go ahead with establishment of the CDMA phone system.
As for South Korea, that country's removal of wireless subsidies would mark the third such reduction since April 1999 and Qualcomm hasn't been hurt yet, Cena said. The Korean wireless service providers who are Qualcomm's customers will react to the subsidy cut by reducing the cost of their service and offering perks such as several months of free service, he predicted.
Who's right? It's impossible to know right now, but Qualcomm sure has come down in valuation. It is currently trading at 46 times its projected fiscal 2001 earnings. And that's not far from its estimated three- to five-year growth rate of around 37%. Count on plenty of volatility and uncertainty from here. But let's face it, Qualcomm is at least starting to look pretty cheap.
For more information and analysis of companies and mutual funds, visit SmartMoney.com at smartmoney.com
(END) DOW JONES NEWS 05-26-00
07:14 PM
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The Finnish government is insignificant beyond human imagination.
Just porchin' (and getting serious),
John |
