Complete transcript of the August 5th weekend TV show
By CBS.MarketWatch.com
Last Update: 5:33 PM ET Aug 7, 2000
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Well coming up, getting wired for profits. We'll tell you where investment opportunities may lie in the wireless world.
(Announcements.)
MS. MCGINNIS: We keep hearing that wireless is the wave of the future -- well, more evidence this past week in a report finding that worldwide sales of semiconductors, the chips that are the brains behind wireless devices, reached an all-time record high in June, of $16.6 billion. Numbers like that have brought the makers of the guts of wireless devices to the attention of Wall Street. Well, we took a look inside wireless devices and found what could be some investment opportunities.
MS. CHRISTOFOROUS (Anchor): Everyone wants to be mobile these days. That's what sparked what many call a global wireless revolution. And it's brought companies behind the technology to the front of consumers' and investors' minds.
The makers of wireless devices have been obvious beneficiaries -- the Motorolas (MOT: news, msgs), Nokias (NOK: news, msgs) and Ericssons (ERICZ: news, msgs) of the world -- but with sales of wireless handsets alone reaching 280 million units last year, and projected to reach 425 million this year and nearly a billion by 2003, many are now looking a bit deeper. They're looking inside the devices to see who the next wave of winners might be.
GEORGE SCALISE (Semiconductor Industry Association): If you look at a handset today -- and let's assume it costs you roughly $100 to buy it -- there's about $50 of semiconductors in that handset. By the year 2003, 2004, the cellular market will consume more semiconductors than the personal computer market.
HANS MOSESMANN (senior semiconductor analyst, Prudential): It's one of the most attractive market that we see. Handsets are going to be ubiquitous. They're not -- they already are in many parts of Europe. Replacement rates are increasing, so we're changing phones just about every year. So as the world becomes more connected, there's going to be a need for lots and lots of semiconductors that go into these connected devices, be they wireless or organizers. And so I think there's a tremendous opportunity, and this is a great way to play that connectivity, if you will, over the next several years, through semiconductors.
MS. CHRISTOFOROUS (Anchor): The baseband of handsets is attracting lots of attention from semiconductor manufacturers. It's where the DSPs and chip sets reside, otherwise known as the brains of the phone. The leaders right now: Texas Instruments (TXN: news, msgs) and Qualcomm (QCOM: news, msgs).
Another group of companies makes power amplifiers, which make for a strong signal when you use your cell phone. Now competing in that area: RF Microdevices (RFMD: news, msgs), Anadigics (ANAD: news, msgs) and Alpha Industries (AHAA: news, msgs).
Next comes memory, the component that lets you store numbers or text.
MR. MOSESMANN: Over the next two years we see companies like Cypress (CY: news, msgs) and Atmel (ATML: news, msgs) benefitting from a tremendous amount of memory content that will be required for next-generation phones.
MS. CHRISTOFOROUS (Host): Finally, what's called opto-electronics is said to be a crucial component needed for backlighting or illuminating the displays and keypads. Hard at work in that area: Cree (CREE: news, msgs) and Emcore (EMKR: news, msgs).
But before you take your cellular phone and dial your broker, remember, investing in this sector, as in any breaking technology, is risky. For investors, Mosesmann says, there are risks, but great opportunities out there in wireless, especially in the handset area. His advice?
MR. MOSESMANN: Be patient. I think that there is a tremendous opportunity here after some of the mixed results that we heard from some of these wireless handset OEMs. If you're a longer-term investor and patient, you're going to be rewarded. Our favorites are Texas Instruments (TXN: news, msgs), Cypress (CY: news, msgs), Atmel (ATML: news, msgs), and Anadigics (ANAD: news, msgs) and RF Microdevices (RFMD: news, msgs). And I think you'll do well with all of those over the next several years.
MS. MCGINNIS: Well, one of the companies that manufactures components for wireless telephones is Wavecom (WVCMV: news, msgs), a fast-growing French company that went public on the NASDAQ and in France a bit more than a year ago. In the last few months, the company lined up a number of deals to supply its products to customers in Europe and in Asia. Here to talk about the company's outlook is Michel Alard. He's chairman of Wavecom and one of its founders.
Michel, thanks for being with us.
Your company manufactures Wizmos, wireless standard modules. They're sort of the brains of wireless devices. Tell us a little bit more about your products.
MICHEL ALARD (chairman, Wavecom): Exactly. In fact, the Wizmo is really the core of the GSM phone, if you like. It's all the electronics which is embedded in mobile phone, including, of course, all the software, which is embedded in it as well.
MS. MCGINNIS: Now most of your customers right now are in Asia and in Europe. Do you have any plans to penetrate the U.S.?
MR. ALARD: Clearly. We'll -- we have got the first FCC approval in March this year, which allows us now to sell product also in the U.S. market.
MS. MCGINNIS: What is keeping you from doing that right now? Is there a question about standards, which standards different countries and continents are adopting here?
MR. ALARD: Exactly. You probably know that, of course, GSM has a very large coverage and a very large footprint worldwide, but the situation, of course, in the U.S. it's much more segmented. We are addressing one specific segment, which is the PCS-1900 market.
MS. MCGINNIS: How wide do you expect the wireless market, wireless telephones and other devices, to become?
MR. ALARD: Well, it's very obviously a huge market, not only about phones, which is, I would say, a little bit a tip of the iceberg, if you like. We also believe that there are many other market opportunities, especially in the automatic sector and, also, multimedia as well.
MS. MCGINNIS: Your company reported a wider loss than expected in the second quarter. There was a report out this past week that said that semiconductor sales reached an all-time record in June, $16.6 billion. Is that -- does that put any fear in you about the price of chips and that that might continue to cause revenue problems for your company?
MR. ALARD: I'd say there was very clearly a price pressure on components today. That's quite clear. We are in a situation which is maybe slightly different from other companies, because we are signing contracts and developing products with our customers so that there is a co-development phase which takes something nine months to 12 months, which means that in practice we will enter the production phase in Q4 this year or beginning of 2001. And we guess that the situation would be quite different at that time.
MS. MCGINNIS: You've also made some deals with car parts manufacturers. Anything exciting on the forefront in that area?
MR. ALARD: Well, clearly, we have signed major deals with companies like VDO (VDOO: news, msgs), Mannesman (MNNSY: news, msgs) or Magnetti-Marelli, and through these dashboard integrators, we can address the entire CAL industry, and it's a huge market.
MS. MCGINNIS: So what will we find in our cars of the future?
MR. ALARD: Well, in fact, in your car you will have a lot a new services regarding, of course, security, navigation, e-commerce and, of course, we'll have all the conventional functions you may have with cellular phones, of course.
MS. MCGINNIS: Okay. We'll look forward to that, Michel. We'll leave it there. Thank you.
MR. ALARD: Thank you.
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And that wraps up this edition of "CBS MarketWatch Weekend." I'm Susan McGinnis. Thank you for joining us. Have a great week. And until next time, we'll see you on the World Wide Web
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