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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: 100cfm who wrote (47566)	10/6/2001 10:42:20 AM
From: Eric L	Read Replies (5) \| Respond to of 54805

re: QCOM & 3G << Will not all 3G be CDMA based >> No, not all, but most will use CDMA (either Direct Spread WCDMA, or Multi Carrier (1x) or TD-SCDMA, which is a combination of TDMA and CDMA as the radio interface. So me, however, will use EDGE or DE CT, and in some cases a combination of these radio interfaces will be used in the same network. It is rather widely assumed that the dominant radio interface will be WCDMA (with the HSDPA extension). << ... and therefore make Q the wireless Gorilla?? >> Qualcomm will only become the "wireless" gorilla if cdma2000 becomes the dominant end to end technology (not just radio interface) deployed in third generation wireless, since 2nd generation wireless will most certainly give way to third generation (despite the fear and trepidation that it won't). Qualcomm is dedicated to making this a reality. They realize the competitive advantage that will accrue to them should they achieve. They are the wannabe gorilla of wireless. << The question of Q's gorillahood is will 3G become a worldwide reality. >> I don't think that is the question since I think most of us are in agreement that Qualcomm is the gorilla of CDMA (cdmaOne/cdma2000), what Moore calls a local gorilla, but a gorilla nonetheless. We may be letting our expectations be set too high if we expect that Qualcomm has to become the gorilla of wireless, or the gorilla of 3G, in the same sense that Cisco became the gorilla of general networking, in order for it to be a fine investment - a gorilla investment. Qualcomm is the gorilla, replete with value chain, of a sustainable mass market within the broad arena of wireless. Qualcomm is a pretty unique beast. It is an established gorilla in a sustainable mass market that will easily transition generations and continue to grow. In addition it will eventually receive license and royalty revenue from the competitive technologies and companies that will dominate wireless. Sometimes, in my mind, I compare Qualcomm to Apple, Jacobs to Jobs. Apple was a great wannabe gorilla, a great chimp. Wintel won the battle for the corporate desktop. Apple survived in its niche, but did not receive royalty and license revenue from the Wintel winners or their value chains. Qualcomm on the other hand may (most assuredly will) lose the race to dominate mobile wireless with the proprietary open architecture they control and promote ... but they will receive royalties from all the major equipment players and some of the software players that dominate wireless. There is obviously a significant difference going forward between yesterdays Apple and tomorrows Qualcomm. Qualcomm just happens to be one of the great IP players ever, and if they can get focused, and stay focused, Qualcomm is a great company to have an ownership position in. << It looks like no matter what Q does, WCDMA will be the ultimate dominant 3G technology. >> That is certainly the way the order book is shaping up. I personally think you can count on it. Depending on who you listen to estimates of eventual WCDMA market share range from 60% to 90% and I suspect it will be greater than 75%. << Dr J said that 1X will far out sell WCDMA for the next several years >> He is 100% correct. << that's unfortunate since it means Q will not be getting royalties on the majority of handsets sold for the next several years. >> That is also correct. The majority of handsets sold through at least 2006 will be GSM phase 2 or GSM phase 2+ (GSM/GPRS). The good news is that out around 2007 or 2008 and continuing forward through the end of the decade Qualcomm should be receiving royalties on the majority of handsets sold. There is more good news, and it is even better, because it is of more immediate benefit . Infrastructure precedes handsets (particularly in the comittee based GSM world) and 3G infra is slowly beginning a ramp right now. It will ramp sharply in 2003 and mass deployment of infra will take place between 2003 and 2007. Qualcomm receives royalties on WCDMA and cdma2000 infra and while the royalties for infra are lower (as a percentage) than handsets, these royalties will be significant, because the addressable market for WCDMA infra is huge, and this will fuel Qualcomm's growth. << What technology do you mean by 3GSM? >> 3GSM (UMTS) is third generation GSM (there is no 1st generation GSM). 3GSM (UMTS) will initially use the evolved GSM MAP network which will eventually give way to the all IP network. 3GSM (UMTS) uses GPRS as the bearer service for its radio interfaces. Within 3GSM (UMTS) resides the Radio Access Network (UTRAN) and initially the UTRAN will house at least one radio interface (EDGE, WCDMA, TD-SCDMA, Satellite) or a combination of them. WCDMA will be the most prevalent. Best, - Eric -