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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: Eric L who wrote (6862)	2/2/2001 2:05:49 PM
From: Webster	Read Replies (2) \| Respond to of 196527

You make an interesting comment about NOk's "dilemma" "Nokia has a dilemma. They have to master CDMA chipset design. Margins are dependent on it in both 2G & 3G CDMA, and the much bigger game will be 3G. Right now they are the only handset player making substantial operating margin and maintaining close to, or better than 20% is a must" QCOM's asic division with their chip compatible format has given the flexibility once only held by NOK to many other manufacturers. In the past NOK has used its flexibility to upgrade features and phone style (plus their volume) to lower costs thus generating industry high margins. Not only can't they produce a competitive asic, their competitors are able to upgrade phone features with QCOM asic chips with virtually no re-design of their handset. So what was once a strength of NOK's manufacturing flexibility has become the norm for cdma handset suppliers. I doubt NOK will ever see similar margins (outside of GSM)in cdma as low feature (and some high feature) phones already have become a commodity. High feature data handsets or internet appliances will have some nice margins, however with so much entry to come, price competition will close those margins as well. Asia, has become NOK's biggest handset competitor. NOK will compete against plastic wrappers with QCOM's engine. This is truly a dilemma for NOK. One alternative for NOK may be for them to use their outstanding brand name and elect not to manufacturer any phones. I believe that Audiovox, does this with cdma phones. NOK has enjoyed limited competition in the GSM world due to their brilliant IPR pool strategy put together in the 1980's. This eliminated competition as if you were not in the "club" you paid 15% royalties to those who were. Since QCOM is the only club member and their royalties are 5%, there is significantly more competition and thus margins are going to be squeezed. As with w-cdma, NOK hopes this will help maintain their 20%+ margins due to the "club" patent pool. Others (domomo) have seen this work and wish it to be successful. NOK's brand name is not irrelevant, however as a manufacturer their best days are behind them. FWIW. Thanks Web.