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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: bob zagorin who wrote (26834)	1/9/2006 12:51:21 PM
From: Bill Harmond	Read Replies (1) \| Respond to of 57684

ThinkEquity: Wireless Communications & Computing Initiating 2006-2009 Handset Estimates. A Bright Future! THINK SUMMARY: We believe that global handset shipments will grow sequentially in '06 and '07, exceeding 20% in both years and peaking in '07. Niche players like PALM and industry leaders like NOK and QCOM will benefit the most, in our opinion. KEY POINTS: Our thesis is simple. Most industry analysts are underestimating the strength of wireless over the next few years. Wireless penetration will be deeper and faster than expected as mobile handset ownership increases in developed markets like the U.S. China continues growing at a fast clip, and emerging markets like India turn into huge outlets for handset vendors. Penetration of emerging markets will be facilitated by extremely cheap entry-level phones costing between $0 and $30. Today, Motorola and Nokia sell handsets costing between $40 and $50 (unsubsidized). True converge is happening and will accelerate, leading to a very strong replacement cycle. The acceleration of the replacement cycle will be driven by portable music, streaming services (such as mobile TV via DMB, DVB-H, and MediaFLO), mobile data communications (push email, etc.), and the emergence of the universal computing and communications device (see the DualCor gadget). We believe that handset shipment unit growth will exceed 20% in 2006 and 2007, with 2007 peaking around 24%. We expect the peak to happen in 2007 because 3G networks will be widely available and carriers will be pushing them in earnest together with appealing new services. We believe that ASP will continue declining, but the rate of decline will be significantly moderated compared to prior years due to a shift in mix driven by convergence trends and the emergence of high-speed wireless networks. As 3G begins to lose its power to extend the strong replacement cycle of 2006 and 2007, mobile WIMAX (802.16e, WiBro, etc.) should re-energize it in 2008 and 2009. Samsung has already unveiled the world's first mobile WIMAX-capable handset. More will soon follow. The biggest beneficiaries of these trends will be niche players like PALM, as well as wireless leaders like Nokia and QUALCOMM. While many companies will benefit from the coming surge in wireless, we believe that Nokia and QUALCOMM are poised to benefit much more than other large cap wireless players due to their dominant market positions, intelligent go-to-market strategies, and leading product portfolios.