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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: Anthony@Pacific who wrote (74587)	1/7/2002 1:32:55 PM
From: lee kramer	Read Replies (1) \| Respond to of 122087

Hi Anthony: I just came across your thread and wanted to say hello and wish you well. Lee Kramer

To: Anthony@Pacific who wrote (74587)	1/7/2002 5:14:57 PM
From: Mark Davis	Respond to of 122087

That's why you're known as a stand up guy Tony, a man that admits he was wrong without whining about it. (--: Keep up the good work.

To: Anthony@Pacific who wrote (74587)	1/7/2002 5:21:16 PM
From: Tassi	Respond to of 122087

Tony..Looks like your best dude the Street.com ..are shorting RFMD\AHaa.. Wireless Wiz Crisis Looms in Chinese Telecom Market By Tero Kuittinen <mailto:t_kuittinen@hotmail.com> Special to TheStreet.com 01/07/2002 02:29 PM EST URL: <http://www.thestreet.com/p/rmoney/wirelesswizrm/10006294.html> The mobile telecom market is quirky in a way: It doesn't really follow the ups or downs of the U.S. economy. Unlike the PC or server markets, mobile-phone volume sales are tied to several different trends. The past six months have been characterized by good sales in Latin American TDMA markets, the Chinese global systems for mobile communications, or GSM, market and U.S. CDMA and TDMA markets. Negative effects have come from the stalled European GSM market, a sluggish Southeast Asia and weak CDMA growth in Latin America and Asia. Now, though, the European phone market might perk up after key new products debut in the spring, and that could possibly have a positive impact. More good vibes could come when Sprint (FON:NYSE - news - commentary) and Verizon (VZ:NYSE - news - commentary) finally roll out their 1xRTT phones and offer high-data-speed models with all kinds of bells and whistles. The China Factor However, it's increasingly starting to look like the Chinese market will create a new drag on global phone sales, right before the positive impact from the new 2.5-generation phones' arrival. This has created a good deal of turbulence in recent days -- and there's reason to believe the trend will continue. The Chinese phone market was red hot in 2001: about 5 million new subscriptions per month. This was more than enough to put a floor under the phone market, even during an otherwise tough year. However, two worrisome trends surfaced during the fall. The average revenue per subscriber for the two big operators (China Mobile and China Unicom) started tumbling during the summer. This indicates that new subscribers are of a relatively poor quality. There has also been a surge of prepaid customers at the expense of regular monthly subscribers; a second indicator of lower-quality new customers. Both trends forecast an impending drop in new subs. Sure enough, the recently released November subscription number was a surprising 3.9 million in the Chinese market. Several sources in China are forecasting 2.5 million to 3.5 million subscriptions per month this year, which could create a shortfall of more than 20 million new subs compared to 2001. If this happens, the revival of phone-upgrade sales in developed markets would have to be really hot this year to compensate for the reversal. Why now? The Chinese middle class is perhaps 150 million members strong. The number of digital phone subscribers in China right now is around 140 million. The math isn't that hard to do. The Sounds of Silence While the calculations themselves may be fairly simple and the omens from the two aforementioned trends are pretty clear, the topic is more or less taboo on Wall Street for two reasons. First, China is Motorola's (MOT:NYSE - news - commentary) most important phone market, the only region where the company still holds a 30% market share. Second, China Unicom is just launching a CDMA network in China, despite the fact that about 140 million GSM subscribers are in that country. China Unicom is the only operator in the world trying to launch a new digital standard in a market that already has more than 100 million subscribers of the dominant standard. As fate would have it, China Unicom's timing appears to be as disastrous as its strategic vision: The launch is taking place just as the Chinese GSM market is switching to prepaid phones, yet Unicom isn't offering CDMA phones as a prepaid option. The quality of new subs is eroding just as Unicom is trying to position CDMA phones as a high-end product. Basically all of the high-earning Chinese are already locked into GSM service programs. Even worse, Qualcomm (QCOM:Nasdaq - news - commentary) , Motorola and Lucent (LU:NYSE - news - commentary) have bet big on the China Unicom's CDMA network rollout this year. As CDMA subscriber growth in Latin America and Southeast Asia has started dropping below forecasts, these companies have switched their attention to the Chinese market. Unicom was able to extract various concessions and financial sweeteners as a condition for committing to the CDMA launch; most likely the initial network bidding was so competitive that the infrastructure vendors agreed to sell at a loss to gain entry to an elusive new growth market. Closing the first deals at a loss makes sense if massive upgrade orders are in the horizon. However, if the network launch fizzles, the vendors will be left holding the bag. If the Chinese market for new subscribers stalls this winter, both Motorola and Qualcomm can kiss their year 2003 earnings estimates goodbye. This isn't a short-term IT slump -- it's a structural change affecting long-term earnings growth. Motorola's recent first-quarter shock warning fits the China crisis situation like a glove. Even as Nokia (NOK:NYSE ADR - news - commentary) and Ericsson (ERICY:Nasdaq ADR - news - commentary) have strengthened their grip on the Latin American growth market and received mammoth upgrade orders from AT&T (T:NYSE - news - commentary) and Cingular, Motorola has grown increasingly reliant on China. Most Wall Street analysts are responding to the China alert with stony silence. They can't criticize the strategic decisions of Motorola and Qualcomm just as the Street is trying to whip up a telecom-rebound buying frenzy among its clients. Nevertheless, major investors have started reacting despite that silence. The small investors may end up being the last to know about a new inflection point in the telecom market.