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

To: Mike Buckley who wrote (419)	11/25/2003 9:42:31 PM
From: Eric L	Read Replies (1) \| Respond to of 2955

Wireless Technology Migration in the 'Ameriacs' --Mike Buckley << Assuming GSM carriers migrate to some flavor of CDMA including W-CDMA and assuming QCOM gets a reasonable share of W-CDMA royalties and chipsets, should Qualcomm investors be concerned that GSM has done so well in the Ameriacs? If so, why? >> What's an Ameriac? <g> If (and when) GSM carriers migrate to some flavor of CDMA including W-CDMA, Qualcomm will get a nice chunk of royalty. That's a fine reason to invest in Qualcomm. Its one of the principle reasons I hold them. In addition and to be sure, Qualcomm will also get some market share in W-CDMA chipsets and that should offset erosion that will inevitably occur - already is starting to occur, it would appear on the CDMA2000 side of their business. On the chipset side of the business Qualcomm lacks proprietary (open) control of 3GSM WCDMA architecture, and as a consequence, the competitive advantage they enjoy in CDMA2000, they simply don't enjoy with 3GSM WCDMA, and they have formidable competition despite their chipset design and (fabless) manufacturing competence. They face a very uphill battle to achieve their extremely aggressive targeted market share. Now that aside, had technology adoption by carriers - both the early adopter visionaries, and the pragmatists that followed - tumbled differently in the Americas, Qualcomm would control the technology architecture, have a significant advantage in chipset sales, and receive royalties on all CDMA products sold, for what appeared - back in the 'GSM is Toast' days of 1999 or early 2000 when Qualcomm was 'the poster child for irrational exuberance', as Tekboy once stated - to be the dominant technology in all of the Americas for all of the decade we now are enjoying and beyond. A slam dunk. I think all of us assumed back then, that GSM did not have a prayer of catching up with CDMA in the Americas in this decade. It now appears that they will. What we have is fine CDMA growth in China and India, being offset by strong GSM growth in the Americas. Overall worldwide GSM subscriber market share continues to increase and CDMA - the technology over which Qualcomm maintains proprietary (open) control - market share continues to stagnate. This is not to say that Qualcomm isn't doing well - they are - but I think we had hoped for better in this regard. << Assuming GSM carriers migrate to some flavor of CDMA including W-CDMA >> The GSM carriers in the Americas have no near term plans to migrate to W-CDMA although they might do so eventually whenever eventually occurs.They all have announced plans to migrate to GSM GPRS, or GSM EDGE, not WCDMA, and Qualcomm receives no royalties on infra or handset sales to this rapidly growing user base, and doesn't have a chipset to offer. EDGE isn't even on their roadmap yet, although I suspect it will need to be, since EDGE has sen the light of day, and is not just an America's aberration. AT&T Wireless is an exception to my statement above. They are the single carrier in the Americas with specific plans to migrate to WCDMA, and the best positioned (along with Rogers) with a spectrum inventory to do so, particularly since WCDMA is being downbanded to 850 MHz for the Americas. Still, their timing, other than an initial 4 city launch planned for end of next year is totally uncertain. Carriers currently controlling ~80% of the TDMA subscribers in the Americas did a flip to GSM. Carriers currently controlling ~15% of the TDMA subscribers in the Americas did a flip to CDMA, and those controlling ~5% are still yet to announce. Putting my Qualcomm hat on, if those GSM and CDMA numbers were reversed, potential Qualcomm growth would be greatly enhanced. Hopefully, I was responsive to your question. Best, Eric--