qveauriche,
re: Piper Jaffray & Sector Uncertainty
<< No reason is given by PJ as to why 1X uptake in America will be so disappointing. It is nonetheless worrisome. >>
Qualcomm downgraded by Piper Jaffray (QCOM) 37.64: USB Piper Jaffray downgrades to MKT PERFORM from Outperform and cuts target to $38 from $50; says company's CDMA handset forecast of 80-90 mln for 2002 is too aggressive and that Piper sees 78 mln; also sees problems in 2003 and 2004, with slow subscriber growth in China and slow 1xRTT adoption in the US offsetting strength in Japan and South Korea.
I don't really see anything particularly unusual about PJ's downgrade at this particular time or particularly worrisome relative to PJ's perspective relative to slow 1xRTT adoption in the US offsetting strength in Japan and South Korea.
It is possible, however, that my expectations are more conservative than others, and my outlook longer than some.
The wireless sector outlook is not healthy, and that has been the case since mid-December 2000, starting in the US, spreading quickly to Europe, and now affecting China.
Wireless watchers looked for a turnaround in H2 2001 - and didn't get it.
They are now looking for a turnaround in H2 2002 - and not seeing it.
Guidance from Qualcomm (and Nokia, and Ericsson, and Motorola) has reflected sector uncertainty since early 2001 - and all the players have been optimistically looking for that sector turnaround that inevitably will come, but may not (will not) come tomorrow
<< Aside from vague (and as yet totally unsubstantiated) ruminations about PCS shelving their 1X roll out, this is the first report of any weakening in the outlook for 1X rollout. >>
PCS has of course not been very definitive on when they will launch. Recently they have made statements that when they launch, it may not be with a full-suite of handset based next-generation services or content.
I really don't think there is any threat of delaying the launch, but without a full fledged marketing campaign behind it, and a full suit of services to back it, 1xRTT handsets may not have significantly higher ASP's (for lack of compelling features that make use of "always-on" capability & higher data-rates), than current cdmaOne handsets, and the replacement lift might not happen at the rate that analysts projected.
Stated overly simplistically, I don't need a color display if their is no color content.
I don't need to upgrade my formerly $500 (plus accessories) KYO 6035 with another $500 (plus accessories) device unless I can justify it, and my wife doesn't need to replace her AV CDM9000 unless it breaks - or features are available that appeal to her that she is willing to pay for. Product segmentation will stay to the low side.
It is also possible that not as many 1xRTT based handsets will be qualified on networks as was projected (regardless of price).
This is not Korea or Japan, where WAP (or similar microbrowser) based internet services, have had exceptionally high user acceptance compared to Europe or the US.
This is exactly the plight of the European, US, and Chinese carriers attempting to introduce GPRS.
The enablers aren't quite ready and in place.
The enablers include WAP 2 (supporting color displays and cascading style sheets and XML & cHTML), J2ME or BREW apps, reasonably priced color displays, security mechanisms, EMS or MMS & IM, billing platforms, OTA provisioning platforms, messaging platforms, etc. Close but no banana, and carriers are restraining cap ex, and unlike Korea & Japan, the US has relatively little experience and expertise in wireless packet-switched data.
<< company's CDMA handset forecast of 80-90 mln for 2002 is too aggressive >>
It may well be for the reasons stated above, as may be the wireless research firms, Nokia's, Ericsson's, Motorola's, and Samsung's, and its really primarily related to replacement rate.
<< sees problems in 2003 and 2004, with slow subscriber growth in China [as well as slow 1xRTT adoption in the US] offsetting strength in Japan and South Korea >>
It is highly possible that PJ was overly-optimistic in projecting subscriber growth in China and may have succumbed to Unicom Hype.
I credit Qualcomm with astute, sensible, and conservative guidance in this regard and perhaps PJ should have listened to them. I can't remember the exact guidance but I think they suggested 4 to 6 million subs and I know they added the caveat that it depended entirely on how well Unicom marketed the service. Obviously the base that builds in 2002 affects that will build further in 2003 & 2004. We are very early into a network build and rollout. I see nothing unusual, nor am I concerned, about what is happening in China, and 1xRTT will not be a quick fix because China has not done much yet with WAP content - and like it or lump it (and I HATE WAP) - data services on a 1xRTT handset will deliver with WAP.
All in all there is nothing unusual about the downgrade, that I cam see.
The sector will turn, uncertainty about the future of wireless data will lift, 1xRTT will be successful (if only because its the only animal on the shelf), ASP's will go up, capital budgets and capital spending will increase, ARPU's will increase, and we'll all be happy ...
... we just don't know when.
Best,
- Eric - |
