>>More recently, I compare QCOM's reception this year as opposed to last at Cannes. Last year, Tero ranted about how "rude" it was for IMJ to crash the party and claim that the rival technologies didn't work. This year, Euro operators are themselves openly expressing their disappointment with GPRS even as QCOM dangles GSM1X before them. Last year, the Euro press treated IMJ like a pariah. This year we read that even though the film festival is months away, QCOM is "shining like a star" at Cannes. The Lords of GSM may not like it, but QCOM is now both fundamental and indispensable to whatever path the GSM carriers choose.<<
This was also the thought I had about the GSM meeting in Cannes. Last year Jacobs said that W-CDMA was not going to be commercially available in quantity until until 2004-2005 and was blasted unmercifully from all directions. Six and twelve months later the Euro carriers have finally sheepishly admitted this to be true. This year he calls GPRS basically flawed and unworkable, and is met with resounding silence. Quite a change.
In three years of studying this company, it is now clear that the pace of change is nowhere as fast as we here can see and comprehend. We have the entire Q line-up of chipsets spelled out through the 6xxx series, and it is clear that upon the completion of production of these chips QCOM will be addressing the needs of the entire wireless world. This is a great thing, and a solid company with solid prospects for competing well for a long time. What is hard is both the technology (for the company) and the waiting for it to come to market (for the investors). We knew years ago the progression QCOM would be making in its advancement of CDMA, and we know it now, with even more confidence that it will happen because Qualcomm now has a deserved reputation for producing in a most often timely manner what it says it it going to produce. The timeline has been mostly laid out for us, but it is longer than we would like.
Realistically, the average wireless consumer can not, even now, tell the difference between CDMA, TDMA, or GSM. All have functional voice and crappy data. The U.S. CDMA market is still overwhelmingly using IS-95A. Think about the '95' and realize how long it takes to get to a new generation. The U.S. market is very near to starting on a new generation of wireless technology with 1X for the first time since digital shrank the phones from bricksize years ago. It is also going to take a long time for even the benefits of 1X to be realized, as the chips available now do little more than increase the voice capacity, the data application 1X chips are still quite far from production volume. Although the voice capacity only 1X phones will be great for the carriers as they become widespread and cheap over the next few years, they do little for those who want to see applications, for which we will have to wait. In 1999, my personal dream app was a wireless laptop card with high speed (HDR was demo'd fall '99) access so I could put my laptop in a backpack and work from the side of a mountain. It is still a dream.
On one hand, the current focus on actual earnings and debt loads is a large negative, as stock prices no longer put a large premium on the dream of future earnings, which has depressed the portfolios of all but the shortest of our investing friends. The other hand, however, is positive for solid companies like Qualcomm. It is only now a matter of time before a very harsh light is pointed at the upgrade path of the carriers. It has started, but now it is more of a flashlight. If PCS is getting hammered for its fully paid for (or bought, anyway) spectrum, small upgrade cost path debt load, just wait until this summer when 1X is turned on, and AWE and Cingular are asked to provide greater details about the costs of not enough spectrum, GSM chageover, EDGE upgrade, and finally W-CDMA. It will not be pretty. Unfortunately, again the word wait.
The excesses of the bubble are being squeezed out, and bringing down all boats. As one who came into the investing realm right as the market took off on the biggest rollercoaster in 70 years, it has been very hard to make out what, if any, correct mechanism exists for valuing the stock of a company. In the bubble, it just took a good story. Now, it is full accounting, cash flow, maybe even retained earnings. Tomorrow, what will it take? QCOM has not changed a thing in the last four months, except to continue doing what it has said it would do, and it is worth half as much?
My name is Getch, and I admit I do not understand the market.
P.S.
I wrote this about an hour ago, and then had breakfast with the kids. It became clear to me for the first time that I am not smart enough to time this market. The thing to do is concentrate a lot more on the regular job, and plow the money into investments in these solid companies, which may or may not quickly appreciate, and start building again. Thanks to the many here who have provided the diligence to identify the positives and negatives over the years. I will not be around much for awhile. |
