Durig Capital, LLC Recommends Buying Qualcomm (QCOM)
LAKE OSWEGO, Ore., July 18 /PRNewswire/ -- Durig Capital, LLC, a branch office of Financial West Group, Inc., believe in owning companies with outstanding advantages, and they further believe that Qualcomm, Inc. (Nasdaq: QCOM) could possibly be one of America's great companies. Please see Robert Goldfield's article on Durig Capital at durig.com .
The question is: Can the growth of Qualcomm achieve a tornado like the past? We believe the answer is "Yes."
Last week Qualcomm signed an agreement with Nokia, wherein Nokia agreed to pay royalties on all versions of CDMA. Nokia is, by far, the wireless phone leader. The Nokia global handset market is above 30% and more than double the #2 competitor, Motorola, at 15%. Nokia strength has been in GSM @ TDMA markets.
PAST
Durig Capital believes this news announcement of Nokia paying licensing for all forms of Qualcomm's CDMA is similar in magnitude to when IBM, then the world's largest computer company, agreed to work with Microsoft's windows product. IBM's announcement has been credited as the "Microsoft ultimate win." Since beating IBM, Microsoft has been said to have no competition.
Windows used a graphic interface that was one of the single biggest improvements to the PC. This helped to accelerate new markets while having an outstanding upgrade cycle. Point and click was vastly better than writing instruction in computer code or DOS. The combination of massive new cycle and dominant market share allowed Microsoft to, within years, become the world's most valued company.
Durig Capital believes that developing high-speed data for the wireless industry could be the single biggest improvement for the wireless industry. This improvement could be of a magnitude or even bigger than DOS to Windows. As the third generation of wireless or G3 is launched, it will allow people on a wireless solution all the advantages of the high speed Internet plus high mobility, not to mention voice. Because most countries have a much lower PC penetration, than that of the U.S., getting Internet in other countries could be a big issue. Japan, with a low PC penetration rate, launched the I-Mode, a wireless Internet voice data solution and has demonstrated tremendous success.
PRESENT
Qualcomm has increased its profits 10-fold since we originally began investing in it. The real driver for Qualcomm was its royalty stream. Qualcomm gets royalties from companies that manufacture CDMA products. Some people have quoted that Qualcomm retains about 4-5% royalties on every CDMA phone sold. Qualcomm would not disclose this information.
Qualcomm receives royalties on approximately 14% of the global handset market, which currently use CDMA.
Today the other standards are GSM @ TDMA, which have approximately 85% of the global market. GSM @ TDMA high-speed Internet plans are to move to W-CDMA, which is being recommended by Nokia. Since Nokia was the last of the majors to sign using Qualcomm's license, it appears Qualcomm will receive royalties on all products built on both G3 standards. This means that Qualcomm has a chance of receiving payments on up to 90% of the global handset market. Simply, it could mean a 6-fold increase in market share.
FUTURE
Because the Internet is becoming a dominant tool and many believe the world's fastest growing technology, we believe the world markets are hungry for its uses.
The wireless industry has been, by far, the dominant platform and the highest penetration rates of all global technologies. Currently about 400 million handsets are sold yearly. Wireless has not had a major improvement in years.
In the next few years, we are going to see the combination of the world's fastest growing technology (the Internet), merging with the world's largest technology platform (Wireless). This merger could possibly be one of the greatest upgrade cycles of our day. High speed wireless voice @ data solutions.
With the new Nokia relationship, it appears that Qualcomm owns the key building blocks for this marriage to occur. Quacomm, in the next generation, could achieve a Microsoft like 85% market share of all 3rd generation products. The internet wireless could produce both one of the largest increases in new markets, plus one of the biggest upgrade cycles, all on a CDMA royalty stream, giving Qualcomm a chance to grow profits 10-fold for a second time. This is why I believe Qualcomm could be one of America's great companies.
Durig Capital specializes in identifying long-term advantages. If you would like to sign up for our next report, please leave your e-mail address at durig.com .
The information contained herein is based on sources believed to be reliable but is neither all-inclusive nor guaranteed by Durig Capital. Opinions contained herein reflect our judgment at this time and are subject to change. Durig Capital does not undertake to advise of changes in its opinion or the issuers of securities that are the subject of our research. The securities discussed in this report may be unsuitable for investors depending on their specific investment objectives and financial situation and needs. For additional information, please contact Durig Capital, LLC. This document is published in the United States for Residents of the United States.
Durig Capital, LLC is a member of the National Association of Securities Dealers, CRD number 1269163.
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SOURCE Durig Capital, LLC
CO: Durig Capital, LLC; Financial West Group, Inc.; Qualcomm, Inc.
ST: Oregon
IN: FIN TLS
SU: RTG
07/18/2001 13:44 EDT prnewswire.com |
