Below is a transcript from Saturday's interview with Irwin Jacobs, QCOM's CEO. Whom should we belive, Bill D. and his cheerleading squad spouting mistruths? Or the companies CEO and some very competent analysts?
I don't dispute IDCC has potential royalty bearing IPR's.
However when the fools start speculating that Q doesn't get paid on WCDMA, and that IDCC will someday have a larger market share for WCDMA chipsets than Q - i have to laugh.
And why does Bill D suddenly show up an SI/Yahoo/RB just when the stock jumps a bit - BECAUSE HE'S A PUMPER!
He's become a laughing stock here and on Raging Bull - and deserves it since many people lost money on the last pump/dump.
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The following transcript is based on a radio interview conducted by Bloomberg News with Dr. Irwin Jacobs on July 7, 2000.
Interviewer: There seems to be uncertainty now over which cell phone standard will be ultimately used in Korea. Which version of CDMA which QUALCOMM developed, either WCDMA which is a standard favored by Ericsson and Nokia or CDMA which seems to be your favorite standard. What do you think is happening there?
Dr. Irwin Jacobs: Well first of all, I think the issue in Korea is still to be decided as to which way the companies go, which technology they use, but that's in the new frequency band, the 3G frequency band, that is yet to be awarded. In the existing frequency bands, they continue to use our existing CDMA technology and indeed they are the first to upgrade to third-generation technology in the existing band. SK Telecom has announced that they will be providing the 1xMC technology roughly in October this year and KT Freetel in roughly November this year and so the very first third-generation technologies will be based on our 1x technology will be available this year. We'll be able to see the impact of that great improvement in both voice capacity and data rates before the end of this year in Korea. Now in the new frequency bands which are yet to be awarded and will be built out etc., in either case they will be using CDMA, and whichever flavor of CDMA it is, we're quite pleased with the fact that most of the world is going CDMA and that can only benefit us in the long term.
Interviewer: And that's because you earn royalties on all CDMA used?
Jacobs: Right. Any commercial CDMA system for mobility users has to use our technology and we have licenses with most of the potential manufacturers. Many are upgrading those now to 3G. Many have already done so.
Interviewer: What's the difference between WCDMA as opposed to cdma2000? In kind of basic terms and what do you think it would mean for QUALCOMM if Korea chooses WCDMA as opposed to cdma2000?
Jacobs: Well first of all from QUALCOMM's point of view, the royalties will be the same regardless of which flavor of CDMA is used in the new frequency bands in the future and so that's not a great issue. With respect to the chips, we currently have the greatest expertise in manufacturing CDMA. WCDMA or Direct Spread, whichever you wish to call it, or the Multi-Carrier technology are CDMA. It's not the TDMA used in GSM. It's completely, completely different from that. It's CDMA and we have the greatest expertise on CDMA chips and we are extending that to all flavors of CDMA and so those small changes in the different flavors are ones that will be accommodated in our chips and we expect our expertise will in fact ensure that we provide a highly superior chip and therefore end up with an interesting percentage of the market. The interesting aspect though is that as we go ahead into 2003, 2004, that much of the world is going to CDMA in the new frequency band and therefore the growth in the CDMA market is going to be huge and we expect to capture an interesting part of that market.
Interviewer: Do you think that growth for chipset sales for QUALCOMM will be hurt at all if Korea does decide to go with the WCDMA?
Jacobs: We expect to be selling a significant part of the CDMA chips. We think that there is great pressure in Korea whichever flavor they go with to have some part of their chips be locally manufactured as opposed to manufactured or bought from other companies and so we think there can be over some time, a decrease in our percentage, but the market is going to grow much more rapidly. Which flavor it is I don't think will be a great issue.
Interviewer: How much revenue do you earn from licensing CDMA technology and how much from sales of cdma2000 chips?
Jacobs: It really depends on the time period, etc. Probably on a revenue point of view, it may be in the order of 60/40 chips to royalties and licensing. On a bottom line, it probably is a much larger percentage from the royalties side of things.
Interviewer: What will change for QUALCOMM if Korea does chose WCDMA as opposed to cdma2000?
Jacobs: First of all, the main change for QUALCOMM is a great one which is the fact that they are going to third generation this year and that will give all CDMA operators worldwide a huge advantage over the next couple of years over other operators using other technologies. They will have the high data rates, the higher capacity, all of the advantages of CDMA. Then, as other operators and manufacturers begin to introduce CDMA, that only grows the market and so we see that as being a win-win situation. The flavor is not that critical. If you ask me which one I think would be at the greatest advantage to them at this point given their experiencing using the 1x technology and looking at the greater efficiencies of 1x technology, both the 1xMC and our new HDR technology, I would say that they have a great commercial advantage using those technologies.
But from our own revenue and profitability point of view, I don't think it's critical. There is an issue that's been raised about roaming worldwide. I think the roaming issues will probably be taken care of before we get to third generation in that we're already providing the capabilities, and in many cases providing multi-band phones. The manufacturers are providing multi-band phones that operate in the cellular with PCS and will operate in the new 3G bands when those become available. Secondly, they'll be multi-mode so they'll operate not only with different flavors of CDMA which is relatively straight forward but also probably with the TDMA mode used by GSM today and so you'll see the multi-mode phones which allow worldwide roaming and finally the two networks that exist in the world today, one in which GSM is based, GSM MAP, the other in which U.S. TDMA, CDMA and AMPS are based, ANSI-41, those two are being connected now and so that the roaming support because of having two different networks, that issue will go away. Finally, looking forward, my own belief is that most of data and most of the voice traffic going out into the future will go over the Internet and those are common network protocols and so the issues of the differences will become even easier to deal with. But I expect that roaming worldwide will become just more and more generally available for those that wish it because the multi-band, multi-mode, multi-network issues are now being dealt with.
Interviewer: So you think from a revenue standpoint for QUALCOMM, it doesn't matter whether cdma2000 is the one chosen or WCDMA is?
Jacobs: I think the most important thing to QUALCOMM is that people move to CDMA as quickly as possible. My major concern would be that in introducing a new technology such as WCDMA, the risks are a bit higher. The delays could be there and therefore we'd see a slight delay so that is a risk. But as far as people moving to CDMA, that's only a benefit from our point of view.
Interviewer: What do you think the market is for CDMA? How fast is it growing and what are we going to see as far as cell phones using the standard in the future?
Jacobs: Well in existing bands, I think you will see very rapid growth now in CDMA in the U.S. as we go more and more to digital. I think we are beginning to see a market develop, and by 2002, I think we'll be quite large for wireless Internet access and that by far favors CDMA. I don't think there is really any competitor that's credible at this point and so I think that means that CDMA growth will be accentuated in the existing frequency bands over the next couple of years. Then as new frequency bands become available in the third generation, where most people are using CDMA, that growth will even further accelerate and so we see the increasing market for wireless Internet access as greatly favoring CDMA and the fact that everybody will be going, well almost everybody in the future, going to CDMA in the new frequency bands means that it probably makes a lot of sense to go to CDMA earlier rather than later.
Interviewer: CDMA phones right now are about 20 percent of the cell phone market and I think Nokia has predicted a billion cell phone users by 2002. What percentage of phones do you think by then will use CDMA technology?
Jacobs: By 2002 I think the third generation will still be a minor factor and so it's the growth in CDMA in the existing frequency bands through 2002 that will guarantee the billion, billion plus number of subscribers and we think that CDMA will continue to increase its market share. Then as we move beyond 2002 and aim towards that second billion of users, just about everybody will be adding new capacity through CDMA and so the growth will be even faster.
Interviewer: What do you think are the prospects for cdma2000 in Asia now or even worldwide? There's been what some folks call setbacks for QUALCOMM with China United Telecommunications agreement unraveling and South Korea's government decided to end cell phone subsidies, what does the landscape look like now?
Jacobs: Again, I think the landscape is positive. I'm disappointed that there has been a delay in China, with China Unicom delaying their move or their use of the CDMA 800 MHz spectrum, but I think that's temporary. There has been a debate as to which form of cdma2000 to introduce. Whether it's the 95A which is mostly used throughout the world, 95B which is being used in supplying the 64 kilobit per second service in Korea and in Japan right now. Whether 1x technology that's being introduced in Korea before the end of this year and in the U.S. throughout next year ... I think that will cause them some confusion. Some of their manufacturers preferred the existing technology because they were already very close to being able to supply it. Others prefer to wait and bring up their own capability to supply 1x technology and that's still getting ironed through. Again, China will be going CDMA as is the rest of the world and I think it will be happening sooner rather than later.
Interviewer: Who are your biggest competitors now?
Jacobs: Well on the chipset side in CDMA, there aren't any significant competitors at the present time but we certainly expect there will be. We see Intel and TI, as far as merchant suppliers, focusing a lot on the mobile market. We'll see vertical manufacturers - that is some manufacturers trying to develop and use their own chips and continue to take part of the market. But I believe that more and more the advantages of going with a powerful chipset, in particular using the CDMA expertise that QUALCOMM has, will convert more people to using chips that they buy rather than they develop themselves and therefore even further expand that market.
Interviewer: Your company's shares were the best performing in the S&P 500 last year and now they're near the bottom of the list for this year's shares, for a little bit today I think on fears of slowing sales or growth for cdma2000 in South Korea. Why do you think that shares are falling today?
Jacobs: Well, I think there is some confusion in the marketplace. Again, the Korea companies are moving to CDMA, adding 1x capability in existing bands. They're not changing that at all. And over the next years, we think that is going to be going very rapidly and then they will be going to whichever flavor of CDMA they select. I don't think that's decided yet, but it's a not a great issue and so I think there's confusion thinking that the existing bands were being converted to some new technology. That's certainly not the case. They are being converted to our 1x technology. That will happen rapidly and I think cause great growth and so that's positive. And there's been the ongoing confusion in China as to when they will move ahead. It has been delayed from the original time so obviously that's hit our stock also. But I think what people are losing sight of are the fundamentals; mainly, wireless Internet access is going to a major growth market, CDMA is by far the best technology for providing that and that over the next few years almost all new additions certainly in the new frequency bands will be with CDMA and all that benefits QUALCOMM |
