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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: Ruffian who wrote (11645)	6/6/2000 2:29:00 PM
From: JGoren	Read Replies (4) \| Respond to of 13582

Reuters at it again; apologies if posted but couldn't find it; the last time Cabi said such good junk about Qualcomm it went up 1500%. How in the world does the guy stay employed when he has cost his clients so much money. Watch, he will release glowing report about Ericy's new line of handsets--acknowledging that Ericy is off and running because of Qcom chips: ANALYSIS-Qualcomm's <QCOM.O> China blues appear long-term By Matt Pottinger BEIJING, June 6 (Reuters) - Defeated by European rivals in a key battle to supply mobile phone technology to China, U.S.-based Qualcomm Inc is looking for a rematch when China eventually rolls out next-generation cellular networks. But analysts said this week it could be three years before China, the world's No. 3 mobile market, begins large-scale installation of so-called "third generation" networks capable of delivering broadband Internet and video services. Furthermore, early signs point away from China adopting the next generation standard in which Qualcomm holds the most valuable patents, suggesting revenues from China will be far below what the company and investors anticipated, analysts said. "Qualcomm's premium valuations were on the perception that it had China -- which is not the case," said Marc Cabi, managing director of equity research at Credit Suisse First Boston. The San Diego-based company's share price has been thrashed over the past week, largely on news that China's number two phone company, China Unicom, was ditching plans to build a 10 million subscriber network this year based on Qualcomm's CDMA technology. An official newspaper quoted China Unicom on Sunday as confirming it had abandoned current generation CDMA in favour of the European GSM standard, sending Qualcomm's stock tumbling $5-7/16 on Monday to $67-1/4. The stock has lost roughly two-thirds of its value since it peaked above $200 at the end of last year. UNCERTAIN ROYALTY STREAMS Qualcomm has attempted to put the best face on the bad news. "As we've maintained, we believe that CDMA will be deployed in China. We're hopeful that it will be sooner rather than later," said company spokeswoman Christine Trimble. Since all next generation technologies are rooted in CDMA (code division multiple access) cellular technology -- which Qualcomm was first to develop -- the company apparently stands to earn royalties from any new standard that China adopts. But the amount Qualcomm would collect will differ radically from one flavour of CDMA to the next, analysts said. For example, some analysts estimate Qualcomm would rake in as much as five percent of the cost of every handset sold that is compatible with its homegrown next generation standard, CDMA2000. But an alternative standard, W-CDMA, has been developed by a slew of telecoms firms, from Sweden's Ericsson <LMEb.ST> and Finland's Nokia <NOK.N>, to U.S.-based Lucent Technologies <LU.N> and France's Alcatel <CGEP.PA> -- all of which claim a share of the patent rights. Even though Qualcomm claims ownership of the core technology of W-CDMA, analysts said cross-licensing of patents would whittle away its revenues to a fraction of what it would earn from CDMA2000. So far, W-CDMA appears to be the strongest contender for the next generation in China because it is the easiest upgrade from GSM, the country's prevailing standard. It is also conceivable that Beijing would attempt to implement a homegrown technology developed with Germany's Siemens AG <SIEGn.DE> known as TD-SCDMA. It is unclear whether Qualcomm would be able to claim any royalties from that standard. "In the 100 plus years of telecom history, no company has been unduly enriched by royalty streams," Cabi said. "Carriers shun paying high royalty rates and move to other alternatives." ANALYSTS STILL RECOMMEND "BUY" While China troubles have taken their toll on Qualcomm's share price, most analysts agree its shares are worth buying based on the company's strength in other markets. "I think once they get beyond these near term issues the stock will do well," said Tim Luke, senior wireless equipment analyst at Lehman Brothers. "They have a very strong pool of intellectual property on one hand, and on the other hand they are the leading chip supplier." CDMA has roughly 57 million subscribers worldwide, concentrated in North and South America, and a handful of Asian markets, including South Korea. The European GSM standard, by contrast has more than 300 million subscribers worldwide. Qualcomm also sells 90 percent of the chip-sets that go into CDMA mobile handsets, although Nokia and Motorola <MOT.N> are ramping up their own chip-making plants. Inside China, there is a shadowy People's Liberation Army-backed phone company which already operates small-scale CDMA networks, leaving room for possible future expansion. But the future of the company, China Century Mobile Communications, is tenuous in a country that officially bans the military from business. In the near term, Qualcomm appears to be shut out. "The market is telling us the valuation has been too aggressive," said Cabi, who gave a "cautious" buy recommendation. "Now it's coming down to a more reasonable level." 05:46 06-06-00

To: Ruffian who wrote (11645)	6/6/2000 7:51:00 PM
From: quidditch	Read Replies (4) \| Respond to of 13582

Four or five comments to recent posts of note: 1st- I'm surprised no one reacted to the following (from the Goldman Sachs comment put out on Q's earnings by Ruff): We are maintaining our current rounded fiscal (Sept) estimates for Qualcomm, although our $1.10 estimate for this year has been fine-tuned to a single-point $1.08 to reflect some of the pro forma guidance of the company.) Our June quarter is now $0.27 (versus $0.28 before) and our September quarter estimate is now $0.28 (versus $0.31). We are still about a nickel above guidance. With the news re. 1x chips shipping, front-end loading in Korea due to the subsidy ban and the estimates for 15 million or so chips for the quarter, what pro forma guidance is GS referring to and WHEN was this guidance given? I would have thought that recent guidance would be pushing EPS somewhat higher. Granted, GS has never been a great fan of the Q!, as during all of 1999 GS never had better than a trading buy on the stock (it is now MO--that's outperformance, not tobacco). GS's wireless universe waxes ecstatic on NXTL (they love the Nextwave fiasco), VSTR, NOK, ERICY, all the usual suspects. Q rarely gets a mention of any kind. And when it does, it's pushing guidance lower. 2nd- re. the inevitability of NOK signing a deal with Q because otherwise it will be frozen out of the 1x chip market--would it were so! However, given the concerted FUD effort by NOK in respect of DS, the alliances with DoCoMo, IDC, MOT and just about every possible anti-Q party out there, I don't know. It's not as if the wireless universe generally (i.e., GSM) is not growing rapidly and other "opportunities" don't loom (Japan, Korea, AWE): it might be a mistake to believe that NOK is crying in its beer at the thought of being frozen out of the 1x/CDMA2000 market. Doubtless it would be more lucrative for Q and NOK to put aside their differences, but NOK is involved in a high stakes game here, and they ain't exactly going broke for the moment. Seems to me they're going for broke, with their partners in crime IDC, for example. 3rd- re. the royalty pie and the Q's net take on DS: at the moment, as far as we know, Q does not yet have a license for the GSM network protocol and other network elements on which DS is based (i.e., other than the air interface and related IPR). As far as we can tell, the net take on a Q DS chip will be less, even though the royalty rate on the Q IPR is the same for DS as for MC. Refusing to license Q's IPR for DS as a means of holding them hostage to Q's interpretation of what the offsetting IPR might be worth to DS operators and equipment makers might run afoul of "fair and non-discriminatory" basis for licensure under ITU principles. Eric L. might want to address this point. 4th- true as someone pointed out: MOT's settlement with Q differentiated between pre-July 1995 (lower royalty rate) and post-July 1995 (prevailing rate) IPR for which MOT has to pay the Q! But 3G was not part of that deal. MOT and NOK remain outside the fold in that regard. 5th- pheilman, good catch on Ruff. But note that OnStar has been used by GM Cadillac for years as a GPS system, without using CDMA. The press release refers to the forthcoming plan to incorporate internet access as part of the OnStar package, which presumably includes Verizon's (ne BAM) CDMA modems. So the 300,000/1,000,000 OnStar sub numbers might be referring to pure OnStar, without Q's chip. Good news nonetheless on the marketing success Verizon is having with GM. 6th- the amoung of FUD spun around the China Unicom saga is astounding. (The latest WSJ story now touts that Q's framework agreement has fallen asunder because it insufficiently armed the local Chinese constabulary with homegrown power to make equipment. My recollection is that the framework agreement was built on exactly that notion. Yet NOK and ERICY continue to sell the heck out of their oferings in China. I shake my head at this turn of the worm. Wonder what the EU/China deal on WTO would have triggered in terms of the FCPA were it subject to same.) It is as if every investor, every finance writer, every news service that was left at the station as the Q train left early last Spring (seems like a lifetime ago), needs to spew its pound of s--t as the newly shrunken David. As Dr. J is want to say, "it's a land grab out there." Let's hope the Q long ago staked the best claims. It does afford us a bit of comfort to realize that Q's management foresaw some of this opera: in its investment in the Korean carrier and the sale of the handset division to KYO, Q was arming its quiver in the struggle for the heart of Asia. Steve