Isn't the more accurate analogy for QCOM not the railroad companies, but rather the manufacturers
i wasn't drawing an analogy to QCOM; the comparison was railroad operators and wireless carriers. there are a lot of similarities between them, in terms of the boomtime development funded by easy capital without regard to profitability; subsequently, burdened by heavy debt loads, the entire railway industry went bust. and i would not be surprised to see many of the wireless carriers go bust as well.
obviously the situation is different for an unleveraged technology provider like QCOM, but they are ultimately dependent on advances in the wireless industry. which advances are made more difficult if carriers are hamstrung financially.
of course, my own arguments against seeing QCOM as a compelling investment do not require any negative prognosticating on the wireless industry (negative prognostications on the industry are a free weekend bonus -g-). i can be sufficiently bearish just by looking at the share price, the options dilution rate, and the long-term earnings growth assumptions that would be necessary to provide an attractive long-term return (defined as a return of, say, 200 basis points in excess of the market's historical average over the next, say, 10-20 years).
Won't the fate of the PCS launch answer so many of these questions for us?
i kind of doubt it. i mean, as PCSTEL said, voice is the killer app. what do we expect? that there's going to be some kind of mass migration to PCS when 1x launches? i certainly am not going to change, because i've had PCS here and was not satisfied with the coverage. i don't care about playing stupid bowling games on a cellphone. but that's just my opinion.
basically, my opinion is that as technology evolves, the main need (the killer app) gets taken care of. during this period, margins and prices are rather high, which encourages too many competitors to enter the industry. more competition comes online, which, combined with technological advances, ends up slaking users' killer-app thirst. after which the bells and whistles get better but there's no more money to be made. let me give you an example from the PC world...
recently i bought a new PC. i was amazed at how cheap they are and how powerful they are. i started off with 512 megs of RAM, but added another 512MB card for a measly $143 (DELL brand). i always thought of RAM as this expensive thing, but now you can literally swim in the stuff. i can remember 6 years ago or so when i had to pay like 600 bucks for an extra 8 or 16 megs. and my first notebook in late 93 had a 2MB add-on RAM card that cost 400 bucks.
there are millions of Dilberts all across america who've had these type of experiences. and they laugh about the past and think, gee, i will never be so stupid as to waste a whole grand on a PC again! and if they are like me, they also think, gee, i will never pay more than 50 bucks for a cellphone again! if they take it to the next logical step, they may wonder if being 90% tech stocks is such a great idea.
not just that. i got a new 21-inch Sony CRT which does 1920x1200 resolution for under 600 bucks. my first 21-inch monitor (from around 1994), an NEC, only did 1280x1064 and didn't look half as good, and that pig cost me nearly 3 grand.
meanwhile, i got a new printer, an absolutely fantastic Minolta PagePro 1250E for 300 bucks. i can't believe how kick ass this thing is (i actually like it better than my monitor and computer, since its speed improvement is a tangible advantage over the old one). it does 17 pages a minute at 1200dpi, and has 18MB VRAM (compared to 2MB in some crappy HP printer, which of course i wouldn't buy anyway because i don't like Carly Fiorina). it is pretty amazing--i want to print out some 50-page graphics-laden PDF doc; just click the button and the whole thing's done in like 3 minutes.
my first "good" printer was a NEC from like 1994, which did 8 ppm text-only, was very loud, and cost me 1600 bucks.
so i'm very impressed with all these advances in computing products, which make it possible to have such a great system now for very little money (compared to before).
based on how great the products are now, you'd think the computing industry would be kicking butt, but it's not. things are horrible in PCs, and in semiconductors as a whole. how can this be when the products are so cool?
it all comes down to the fact that most of this stuff is just extra features that people don't really need. the "killer apps" of email, business productivity apps, and browsing are already taken care of. most of the rest is just gravy.
almost nobody drops 3 grand on a desktop PC anymore, whereas i can remember in the early 90s, that was like the standard price. in fact, i remember a review in PC mag where the author said (as if it was an unchanging law of the universe): "the PC you need will always cost $3000, and the PC you really want will always cost $5000."
nowadays, i think you'd have a pretty hard time getting the bill for a standard PC (not some specialized workstation, or some specialized video-editing box) up to $3000, and i suspect $5000 is not even possible. on the cheap end, they are selling Linux systems at Fry's for 300 bucks.
while some analysts seem to think this is just a "bump in the road", i disagree. it's like, "technology wants to be free", which is not such a good thing for purveyors of technology.
i imagine in 10 years, it is frightening to think what an amazing system we will be able to buy, and how little it will cost. the fact that it will cost so little is not bullish for the vendors!
i think the same thing will happen with cellphones. why wouldn't it? i sure as heck am not going to fork out $500 for a little phone that can take snapshots or whatever. i will wait till the thing is available for 50 bucks, and i think most other people will too.
so i don't think these 3G or 2.5G or whatever advances will offer the incremental demand increases the carriers need to increase their interest coverage sufficiently (that is, to warrant the capex).
Nokia, which made an absolute killing off of GSM and created tremendous shareholder value in the process,
i think they had good timing, and they caught the sweet spot of the adoption cycle. the problem is, there's now a lot more competition and prices will continue to be pressured. i paid $250 for my first subsidized NOK 6160 in 1996 or so. i paid $50 for my latest subsidized cheapo NOK phone, and i'm mad that rob v got the same phone for free.
"technology wants to be free."
that is a tough market to sell into. |
