CHINESE BREAKTHROUGH - BANCRUPCY FOR QUALCOMM?
BEIJING, June 7 (Haywire) - The Chinese government announced a new, revolutionary wireless format (356th Generation or 356G) at its third bi-daily brotherhood meeting today.
The format called SMU-CDMA (Super-Mega-Ultra Code Division Multiplexing) will be the successor to its highly successfull 3G technology called TD-SCDMA (Total Demolition Screwup Code Division Multiplexing). TD-SCDMA was the first 3G system to be rolled out in less than 24 hours and accepted by the entire Chinese population in less one hour without any unnecessary death threats.
SMU-CDMA will improve on the already superior TD-SCDMA by by offering data speeds of up to, equal to and above 348 Gbits/sec (Gigabits per second). Unnamed and unshaved Chinese officials said that the infrastructure will be finished the day after tomorrow with commercial rollout 1 hour after that. The unnamed governement official added that "there is no way in Confucius' hell that we will deploy WCDMA5000 by Qualcomm".
This represents another HUGE blow for San Diego based phone and infrastructure company Qualcomm (NASDAQ: QCOM). The highly despicable telecom analyst Marc "The hollow head" Gabi explained that Qualcomm and Wall Street had been counting on the WCDMA5000 revenues since the late 80s. Gabi further said that he had been including Chinese WCDMA5000 revenues in his projections for Qualcomm since he was 5 years old and that without those revenues Qualcomm would go down EXACTLY 65 points in the next 2 weeks.
Qualcomm officials were not available for comment when called at 4AM in the morning.
seems to be from Yahoo QCOM thread
6/7/00 2:27 am Msg: 207612 of 207914
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Edward (the hatchet) Snyder
biz.yahoo.com
Lacks a key component.
Basically what they did was sign a license agreement with Eastcom that enables Eastcom to build IS95 based equipment which is cell phones and base stations and such.
It really does not have any impact on QCOM because there is no service provider in China building out a CDMA system. China Unicom has a small CDMA system in China, but, they already stated publicly that they are not going to expand that system. Therefore even if you had an OEM in China, they would probably not sell much because there is no service operator that would take additional equipment for subscribers since you are not going see to a lot of subscriber growth.
So, they are basically adding another OEM. If Eastcom exports to the world market that is basically another licensee but you would basically dividing up the pie as it exists today for the world market instead of adding to it. What QCOM is really looking for is to add a service provider in China that would do CDMA. That would increase subscriber growth because currently there no IS95 or basically QCOM technology service provider expanding a system in China and that is what they are really trying to do.
China Unicom was the only proponent of CDMA for a long time and it was being held up by the government as a political football for the WTO. And it got held up so long that the alternative technology, the European technology GSM has such a lead now that it just makes more sense to build out their GSM system so that people can roam between the wider system and China Unicom. You see that If they try to build out the CDMA that is QCOMs technology they would be the only ones doing it and there would be no place for those subscribers to roam really. It would not be completive.
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Snyder on CNNFN 15 June 2000
Did not catch the start
Ed Just Cut our estimates for it. We have been market perform for it thought most of last year. Things just are not turning out very well in the beginning of the year. The Koreans cut subsidy for handset which is going to chew heavily into handset sales into Korea which is a very big market for QCOM,
China is not going to deploy QCOM's technology, that seems to be clear at this point
And their connection with GSTRF is going to probably hurt them, at least psychologically from the stocks perspective, in the near term .
So I think they are in a bit of rough water certainly over the next quarter or so.
Host So the stock just got a bit ahead of itself because everybody was so optimistic about the prospects for QCOM
Yes I think that is exactly the case. I think the business model is good , QCOM is very good at what it is that they do, just that the euphoria over CDMA and the prospects for growth I think got well ahead of the reality late last year the as Testament by the huge appreciation of the stock price and eventually those two have to come together the actual operations on the ground, the growth and the earnings and the stock valuation, I think that is what we are seeing now.
Host Thanks Ed Snyder, you think that QCOM can go to $50, that is another $10 lower than now.
Host Thanks Ed Snyder from umm umm H&Q, Chase H&Q. Combination, recent combination.
Just on again , would never put a sell on QCOM, reserved for bankruptcy
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June 7, 2000
Tech Center
Qualcomm Tries New China Strategy;
Firm Focuses On Local CDMA Output
By MATT FORNEY and PUI-WING TAM
Staff Reporters of THE WALL STREET JOURNAL
After losing a lucrative deal to supply off-the-shelf cellular-phone technology to China, Qualcomm Corp. is mapping out a new strategy to sell next-generation products in the world's fastest-growing mobile-phone market.
That strategy involves greater emphasis on technology transfer and local production. Observers cite the lack of progress in those areas as a factor behind Qualcomm's most recent problems in the country.
China announced Sunday that it won't buy "narrow-band" code-division multiple access, or CDMA, technology from Qualcomm. The decision means China's current mobile-phone network, which had 30 million subscribers at the end of last year and is growing by a million or more subscribers a month, will use only GSM technology popular in Europe. That is a setback for U.S. trade policy, which had made a priority of pushing CDMA in China, and for the San Diego-based company in its battle with European firms for telecommunications supremacy.
China Unicom Scraps Plan Linked to Qualcomm Deal (June 5)
"This takes Qualcomm out of the game for the next few years, and that's a long time to be out of the game," says Mark Cabi, a telecommunications analyst at Credit Suisse First Boston. "The perception for the company's growth is now gone."
As news of China's plans leaked out over the past few months, the company's stock has tumbled, falling by two-thirds since January. Tuesday morning, shares rose 2%, or $1.3125, to $68.5625. Says Christopher McHugh, a senior portfolio manager at Turner Investment Partners, which has sold its stake in Qualcomm, the China announcement "is a big psychological negative."
Now, the company is hoping to stanch these losses by pushing local production of CDMA equipment -- a key demand of Chinese bureaucrats eager to develop their country's mobile-phone industry. "We're working closely with Chinese manufacturers to transfer CDMA technology to them," says Steve Altman, a company vice president, adding that "we have approximately 70 to 75 licensees."
Qualcomm's failure to convince China that it would build enough products locally helped doom its plans to build narrow-band CDMA, the kind of technology currently in use in the U.S. and a handful of other countries. As of now, no Chinese companies can build reliable handsets, base stations and other equipment using CDMA.
If Qualcomm had started earlier building closer ties to Chinese companies able to make CDMA equipment, the government might not have nixed its February agreement, say people familiar with Qualcomm's negotiations. "Unicom [China United Telecommunications Corp.] did not have in place a localization plan so that in two or three years time it would no longer have to import billions of dollars of CDMA equipment," says a Western diplomat.
Unicom, China's state-owned second phone company, said Sunday it won't build a current-generation mobile-phone network using CDMA, but will use Qualcomm's technology in the future. If Unicom follows through, Qualcomm still stands to make money -- the company hopes to have its next-generation product ready by the end of the year, but it is unlikely that Unicom will begin using it so quickly.
Qualcomm was anxious for Unicom to deploy its current narrow-band product because countries are likely to upgrade to new technologies more slowly than expected. "Qualcomm thinks narrow-band will have a longer life span in many parts of the world, and it can't be pleased that narrow-band has been frozen out of China," says Peter Cowhey, a professor at the University of California at San Diego and a former adviser to Qualcomm's chairman, Irwin Jacobs.
Eventually, though, China will almost certainly use some form of CDMA technology. If China uses cdma2000, Qualcomm's next-generation standard, the company stands to gain the most. If China uses another version of the technology, called WCDMA, Qualcomm might receive less in royalties because European companies also claim to hold patents, although the legal battles haven't yet begun.
In a sign that the government is considering using Qualcomm's products in the future, it has asked Chinese telecommunications equipment makers to provide an update on their progress in building advanced mobile-phone networks, including Qualcomm's cdma2000.
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Eliot Walsh (6/5/00)
Shares of Qualcomm (NASDAQ: QCOM - Quotes, News, Boards) took another hit Monday morning, after China Business Weekly reported that China Unicom, one of China's largest telecommunications companies, would not use Qualcomm's technology for at least two years.
In addition, the Wall Street Journal quoted the state-run Xinhua news agency as saying Unicom would not use Qualcomm technology until 2003-if at all. Early in the day's trading session, the stock was down $4.56, or 6.27% to $68.13.
The good news is that the last time the Chinese pulled this three months ago they said they were postponing the deal "indefinitely." Hey, "delayed two or three years" sounds a lot better than "delayed until some point in the future."
In any case, after "news" of the delay started circulating last week, we reported that investor fears were overblown. Today, analysts continued to downplay the developments, saying that although the delays were disappointing, neither their earnings models nor the company's own internal business plans had included significant revenue from China in 2000, and relatively modest amounts in 2001.
Wise move. Predicting whether China will honor a business deal with a foreign technology firm is like predicting whether Arfy will or will not perform once he gets booked on David Letterman's "Stupid Pet Tricks."
Analyst Pete Peterson of Prudential Securities traveled to China last week and met with China Unicom officials. He came away somewhat dismayed by the new news that the roll-out of Qualcomm's technology was being delayed, but insisted that his earnings per share estimate of $1.63 was still "very achievable for 2001" based on the company's current performance.
As of this morning, one member of his team confirmed that "nothing has changed," although she did say they were reviewing the situation in light of the most recent announcement. As of last week, Peterson believed the negative effects of the delays were already priced into the stock.
Instead of using Qualcomm's Code Division Multiple Access-based (CDMA) 2000 technology, the Chinese government is pushing another, relatively untested type of CDMA, the Chinese-developed standard known as TD-SCMA. Designed to dovetail with the widely used GSM (Global Standard for Mobile) standard, TD-SCMA could direct royalties back into China instead of to Qualcomm, as the original deal had specified.
But Qualcomm owns about half of all CDMA patents, and could try to pursue TD-SCMA royalties in court. The Chinese Ministry of Information Industry, which owns the institute that developed TD-SCMA, has partnered with Siemens AG of Germany to develop the standard.
Analysts agree that the most damaging aspect of the most recent developments could be volatility caused by the continued confusion surrounding China's perennially mixed messages. In countless instances, China has contradicted itself in trade negotiations with foreign companies, particularly in the tech sector, and particularly in the context of its ongoing bid to gain entry into the World Trade Organization.
Its deal with Qualcomm has always been a bargaining chip in these negotiations and was hurt when the U.S. blocked its bid to enter the organization last year. Really, not much has changed.
The risks surrounding Qualcomm's CDMA development deal with China are now clearer than ever. Fortunately, it seems that the markets have factored them into the stock's price as well as analysts' expectations. Some day we'll learn.
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Transcript of Ed Snyder and Mark Roberts June 1 2000 CNBC
Host - Edward, let me begin with you, will the CDMA Technology from Qualcomm be deployed in China?
Ed - No, I don't think it will be, actually I think the inertia behind the competing system, which is a GSM system, has being built up over the last few years is such that deploying a CDMA system at this point, Qualcomm's system, is actually a moot point, you would not be able to roam with it and I think that China Unicom has pretty much acquiesced that, in that they going to continue to build out their GSM business.
Host - Well let me ask you, Mark, already GSM is widely used in China, why would the Chinese Population switch to CDMA and Qualcomm?
Mark - Well, I believe that they have no choice but to go CDMA because upon investigation the spectrum that they have is too small to continue to deploy GSM and the Qualcomm version of CDMA known as WCDMA, which many people mistakenly believe is not Qualcomm's technology, is also can not be deployed there. So we have talked to a number of manufacturers as well as with contacts within China, that believe that China Unicom, on their new spectrum, will have no choice but to deploy a nationwide CDMA network, and we believe that's exactly what they plan to do.
Host - Ed, China Unicom has already said that they will be deploying the Technology, are you speaking to different manufacturers?
Ed - No, we are not, as a matter of fact. China Unicom said they will deploy the GSM Technology, the wide band CDMA that Mark refers to, is actually an upgrade that may or not be deployed in the future, but as we sit today , they are adding over about 1.5 million subscribers a month to the existing GSM subscriber base and that has been going on for two years. And that winds up being one of the largest customers for all of the big OEMS in the basic GSM structure. So I think that China Unicom is going to get on the bandwagon and expand their existing GSM business. And wether or not WCDMA is something that we will see maybe in two or three years but nothing that is going to impact Qualcomm in the short term.
Host - So Edward, you are saying Mark is wrong?
Ed - I think that whether or not WCDMA is even deployed in China or not, is a moot point for Qualcomm today. It has been trading down on a number of bad pieces of news, China is just one of them, the Korean subsidy cuts is another and the penchant for a number of their existing customers like the Japanese carrier, DDI, to go to the European Standard, is the third, so I think that Qualcomm is facing a BIG headwind in a number of areas and that is going to play on the stock over the next quarter or two.
Host - Mark?, you are saying Edward is wrong?
Mark - Yes, that is factually untrue, all of the Japanese CDMA carriers that are currently using CDMA have already announced that they plan to deploy the next generation of CDMA known as CDMA 1X, which by the way, is the only international Telecommunications Union approved 3G standard at this point, as well as most of the Korean carriers have already announced that they are going to deploy the next generation of CDMA technology, and I believe the Ed may be confused because the subsidiary that is going public, which is a Hong Kong subsidiary of China Unicom, has existing GSM spectrum that they are going to continue to build out. The agreement that Qualcomm has with the Chinese Government and with China Unicom, the parent company in China is for new spectrum where GSM can not possibly deliver the kind of capacity that they need.
Ed - I would suspect that there is some confusion but I don't doubt that is among the Japanese DDI and IDO uh carriers. What Mark is referring to is the announcement two week ago that DDI would deploy Qualcomm's intermediate technology,. but three days prior to that they indicated that they would go with the European GSM technology, which by the way, covers 55 % of the globe now, if you add into that the existing American TDMA technology, which is the cousin and has the same upgrade path to the European system, clearly 70 percent of the business is going to go --
Host- I just want to ask you about the valuation, the stock is down 53 per cent only in about three months, is not all the negative news already priced into the stock now?
Ed - No as a matter of fact it is not. What you see still and Mark would know this as well as anyone, there are a number of very strong buy ratings remaining on the stock. With the Korean subsidies cut , subscriber growth from Korea is going to drop off a cliff beginning in June , we have people in Korea the last two days talking to the carriers who are apoplectic about prospects for growth there. A large portion for Qualcomm's revenue goes into that and you are going to have to see revisions and guides from the company down.
Mark - No that's factor , I talked to Qualcomm earlier, most of the Korean manufacturers are hoping that --
Host - Got to wrap it up.
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WIRELESS: THE TDMA FACTS
The Real Story of AT&T Wireless Technology
Many of you read George Gilder's May 1 Wall Street Journal editorial, "AT&T's Wireless Debacle," and realized it is a one-sided portrayal of how some communications companies will bring the benefits of a wireless world to consumers and businesses.
The debates over which technology would best serve customers ended a long time ago. Without question or hesitation, AT&T's Wireless' technology choice is the best choice for AT&T and its customers. Beyond its current capabilities, TDMA can be efficiently and gracefully upgraded to deliver the next generation of wireless services for our customers, like high-speed data and rich multimedia applications.
AT&T Wireless utilizes TDMA (Time Division Multiple Access) IS-136 digital technology, the most widely deployed technology in the Americas. For data services, AT&T Wireless relies on its packet-based CDPD (Cellular Digital Packet Data) technology to deliver information efficiently and securely over its Wireless IP network. These wireless voice and data networks deliver high-quality services to 12.6 million customers today, and are poised to deliver next generation services in the future.
AT&T relies on TDMA technology because it is the most cost-effective and widely used technology in the Americas. TDMA has more flexibility than other digital technologies and supports the AT&T Wireless vision for the future of wireless service.
AT&T's TDMA (voice) and CDPD (packet-based data) networks today deliver seamless voice and data services to over 3,000 cities nationwide. Most importantly, our packet-based network allows AT&T to offer our customers flat-rate pricing for voice and data services, which is something CDMA cannot offer. No CDMA solution offers these combined benefits to carriers or customers.
Looking to the future, AT&T Wireless is pursuing its plans to cost-effectively upgrade its existing TDMA network to EDGE (Enhanced Data-rates for Global Evolution). EDGE will bring 3G high-speed voice and data capabilities to every major city around the world. What's unique about EDGE is that it bridges two dominant wireless standards - TDMA in the Western Hemisphere and GSM which is used throughout Europe and Asia - to provide seamless 3G services over one compatible network.
Because TDMA and GSM are based on common elements of time division multiplexing, this is a natural convergence. GSM and TDMA combined have about 250 million subscribers today and will double in 2 to 3 years. These technologies will continue to enjoy the largest market share, bringing service to more than 80% of the world's wireless subscribers.
TDMA will double capacity using smart adaptive antennas and related techniques. This capacity upgrade will not require a new generation of handsets because it will be designed to be backward compatible with existing equipment. Most importantly, this capacity upgrade can be selectively deployed where it is needed and when customers are prepared to use the technology.
Let me also clarify some of the blatant misinformation hyped by CDMA proponents. First, CDMA is far from a dominant worldwide standard for wireless technology. There are more than 11 million paying TDMA customers in North American, compared to 7 million claimed by the CDMA Development Group. Worldwide TDMA has five times as many subscribers as CDMA. Nearly 250 million people use TDMA and GSM technologies, compared to 50 million attributed to CDMA.
Secondly, it's economically viable for AT&T Wireless to migrate our equipment to third generation wireless services by building on our existing base. Our TDMA assets and wholly-owned spectrum and alliances around the world make it strategically sensible for us to migrate in tandem with the GSM operators around the world. And, our technology plan delivers similar or higher data rates (384kbps) as the CDMA proponents at much lower cost. These cost savings ultimately benefit TDMA customers.
As for leadership, AT&T Wireless has continually led the industry in delivering new technologies, services and pricing. The key word is delivering, not promising.
AT&T invented cellular communications, and created the first national network in 1990. We introduced digital in 1993 and invented CDPD that same year. Over the past few years, we've enhanced the voice quality, performance and services in our network by introducing IS-136 service. The ease with which TDMA IS-136 channels could be exchanged for analog channels enabled rapid nationwide digital coverage, while CDMA operators still struggle for contiguous "all-digital" coverage.
In 1997, it was AT&T Wireless that introduced customers to the wireless web with its PocketNet Service, allowing customers - for the first time -- to access the Internet using their wireless phones. Let us also not forget how AT&T Wireless revolutionized the way people use their wireless phones when it introduced Digital One Rate, the country's first flat-rate pricing plan.
Finally, CDMA's circuit-switched networks have limitations that TDMA critics all-too-easily ignore. The growth in wireless data use depends heavily on companies using Internet Protocol (IP) networks to deliver services - both now and in the future. Industry experts and analysts agree that packet-based IP is the future for wireless services. AT&T is already using a Wireless IP, packet-based network with CDPD. CDPD currently delivers data up to 19.2kbps, which is slightly faster than circuit-switched networks that operate at 14.4kbps. And while AT&T's TDMA/CDPD networks can easily and cost-effectively be upgraded to EDGE, CDMA carriers will have to go through several upgrades, including scrapping their current circuit-switched networks, to get to the same point.
Moreover, within the CDMA camp lies confusion and incompatible plans to migrate to 3G. CDMA's incessant need to be upgraded has already proven problematic. For example, the initial deployment of CDMA systems has apparently resulted in lower capacity than was hoped, even though expectations have been ratcheted down significantly over time. Thus it has been critical to upgrade these systems-at considerable expense-after only a few years of operation. If history is the best indicator of the future, the claim of doubling the capacity of CDMA is likely to be overly optimistic.
It is also puzzling that the CDMA community is pushing a large number of incompatible data capabilities, all within a similar time frame. Qualcomm and the CDMA community offer a complicated, three-step migration path: 1xRTT to HDR to 3xRTT. Each step will confuse and inconvenience customers and cost the carrier significant money. Gilder and Vigilante may claim otherwise, but this is anything but elegant. We note also that the brand of CDMA being pursued by Bell Atlantic and Sprint is radically different than W-CDMA being considered by GSM operators for 3G services elsewhere in the world and may well leave the CDMA community fractured.
Detailed analysis by multiple operators and vendors show that W-CDMA and EDGE offer similar data capabilities and performance, but EDGE offers greater flexibility for deployment with limited initial spectral requirements. AT&T's strategy to deploy a 384kbps technology based on EDGE minimizes technology "whiplash" and customer churn while aligning with the emerging dominant global standard.
A clear distinction must be drawn between listening to the technologists and understanding the technologies. The technologies, which in this case are the competing wireless standards, TDMA or CDMA, are being enhanced with innovation in technology. Listening to the technologists can mislead you down the wrong path. So while some analysts advance their own biased opinion, the true road to the Emerald City begins with TDMA.
Rod Nelson
Chief Technology Officer
AT&T Wireless
For more information on TDMA/EDGE, visit the Universal Wireless Communications
Consortium website |
