6/27/00 - Emergence of a Telecommunication Stalwart
New York, Jun 27, 2000 (123Jump via COMTEX) -- San Diego, CA-based Qualcomm Inc. practically
established code-division multiple access (CDMA) as the standard format for wireless data transfer
and is now set to revolutionize wireless internet through its high data rate (HDR) technology.
Qualcomm Inc. (NASDAQ:QCOM ) - a $4 million telecommunication company - is poised in the
Wireless Internet arena to replicate Microsoft's (NASDAQ:MSFT ) achievement of the last two
decades. A company no future Internet user can do without, Qualcomm's technology will reside on all
of the next generation wireless devices. With 327 patents on CDMA technology, it will be very difficult
for anyone to deploy a CDMA product without infringing Qualcomm's IPR...and with 946 more patents
pending the balance is weighted to tip decisively in its favor.
Qualcomm pioneered CDMA technology design, development and manufacture together with market
wireless communications and subscriber products and it designed, developed and marketed ASIC
chips based on its CDMA technology. It also licenses and receives royalty payments on its CDMA
technology from major domestic and international telecommunications equipment suppliers. In
addition, the Company designs, manufactures, distributes and operates products and services for its
OmniTRACS global positioning system used by the trucking industry. The company holds contracts
from Globalstar to design, develop and manufacture subscriber products and ground communications
systems, and to provide contract development services. The company also publishes the popular
Eudora e-mail software.
The convergence of Internet and wireless mobile communication will exert a strong positive affect on
the bottom-line of this 15-year-old telecommunication startup. The company pioneered CDMA
technology (used in cell phones), wireless telecom equipment and satellite ground stations.
Qualcomm was a top U.S. supplier of digital cell phones, but has sold that side of its business to
Japan's Kyocera. Despite the sell-off, it continues to make CDMA chipsets and licenses that
technology to others. However, its main focus has shifted to High Data Rate, a new wireless data
technology.
More people than ever are accessing the Internet and using wireless technologies, fueling the need for
products and services that incorporate HDR. Over the next six years, for example, the fixed Internet
market is expected to double in the U.S. and triple worldwide, while the laptop and notebook
computer market is expected to quadruple in the U.S. and worldwide. Strategists estimate that there
are 32.3 million potential mobile data subscribers, or about 25% of the entire U.S. workforce.
CDMA phones currently in use support only 14.4 kilobits per second against the 56 kilobits for a
standard dial-up modem. In an era of high growth in broadband cable and DSL modems, the present
CDMA technology seems to lag far behind.
To assist wireless networks gain still more speed; Qualcomm has developed a technology called
HDR (high data rate), which offers a fast 2.4 megabits per second - users can actually perform
full-motion video with HDR. Major telecom companies like Ericsson (NASDAQ:ERICY ), Lucent
(NYSE:LU ), Hitachi (NYSE:HIT ) and Samsung have already committed their support. One of the
inherent benefits of using HDR is its ability to work in existing CDMA networks, however it does
require cellular companies to add costly equipment at each cell site. Although the company may face
some competition from a rival technology called 1XTREME developed jointly by Nokia (NYSE:NOK )
and Motorola (NYSE:MOT ), analysts believe chances of HDR's popularity are far better.
The High Data Rate (HDR) technology system from Qualcomm provides wireless Internet solution with
unprecedented speed and mobility - up to 2.4 Mbps in a 1.25 MHz channel. HDR is believed to be the
most efficient, cost-effective way to access the Internet anywhere, anytime, without wires. The system
is versatile; it can be embedded in handsets, laptop and notebook computers, and other fixed,
portable, and mobile devices and can support e-mail, web browsing, e-commerce, telematics, and
many other applications. The technology gives flexibility to service providers as it can be deployed as
a stand-alone system, side-by-side with an existing or future voice system, or integrated into a CDMA
voice system.
HDR gives users the advantage of accessing the Internet from anywhere at anytime. It is expected to
be used extensively by users for email/messaging, personal organizer/scheduling, Internet access,
dispatch, database access, facsimile and from wireless locations. Imagine using a laptop to
download office files while waiting between planes or a personal digital assistant to check your
calendar while relaxing in the backyard.
HDR has another advantage in terms of ease of installation. It installs easily using off-the-shelf retail
components, enabling consumers to set-up the technology themselves and operators to reduce costly,
on-site service. HDR may help telecom companies deliver higher-performing, more cost-effective
wireless data products and services to customers around the world.
Qualcomm will also benefit from the other complementary products and services it can offer. Eudora,
its popular email client is expected to facilitate users in sending/receiving emails from their
data-enabled cell phone. In addition, it offers Omnitracs a satellite-based system that provides
position-location and messaging services for long-haul truckers. Qualcomm started the business in
1988, and today there are some 325,000 Omnitracs-outfitted rigs on the highway. The system lets
trucking companies integrate information from the trucks into their inventory and accounting systems.
Now Qualcomm hopes to apply Omnitracs to the auto industry.
Qualcomm has been one of the hottest stocks on Wall Street in recent times. The Company has been
in headlines recently over many issues ranging from concern over its future in East Asia to chances of
a possible takeover by telecommunication giant Nokia (NYSE:NOK ). As a result the company's stock
has been very volatile on the Nasdaq.
Shares of Qualcomm Inc. jumped in heavy trading last week on revived speculation that the wireless
communications technology company could be a takeover target for Finnish mobile phone giant Nokia
Corp. However, analysts believe that at current valuation the efforts to takeover the company would
face fierce competition given the attractiveness of its business model and free cash flow. The
company's stocks have traded as high as $200 and at present the stock is on the "buy list" of almost
all the funds.
There has been recent concern over Qualcomm prospects in China and Korea. Shares were volatile
after China Unicom, No. 2 state telecom carrier, scrapped immediate plans to deploy the company's
CDMA technology. Looking at China's record of inconsistency in its policies, investors have already
discounted the news. Many analysts believe that there is no alternative for CDMA in China and CDMA
will eventually be deployed. Even if China Unicom is focusing on GSM, it has to migrate to the next
generation of wireless communication i.e. 3G and then has to go through the W-CDMA path.
In neighboring South Korea, one of the large CDMA markets, certain reports indicate that the South
Korean Ministry of Information and Communication (MIC) intends to eliminate handset subsidies.
However, this again may not have a severe impact upon the company's long term prospects as past
reductions in subsidies have shown no major impact upon mobile set sales.
Considering the technological edge Qualcomm enjoys plus expected future royalty schemes, the
company looks to be an attractive investment option. One thing commonly believed about Qualcomm -
even among its critics, who rate its stock as the most overvalued markets have ever seen - is that the
company is poised to become a telecommunication giant in the near future and set to reap the
benefits of its research and development work in the days of 3G telecommunication.
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