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

To: DaYooper who wrote (1875)	4/19/2006 11:08:37 AM
From: Eric L	Respond to of 2955

Gorillas and Chimps and the Competitive Advantage Rory, << The best thing about QCOM -- today it's the chimp of cdma but as the world moves to that interface Q becomes the wireless gorilla. >> QUALCOMM is the gorilla of CDMA (not 'cdma'). Outside of the CDMA ecosystem they are the market leader of nothing except, one could say, of positive and high margin IP flow from cdma based technologies. Feel free to write your own guidelines on what constitutes 800 pound or 400 pound or 200 pound gorillahood and apply them to your own investment objectives, strategies, and tactics. We all hopefully do that do that ... but to Moore's way of thinking (which he borrowed from Morris and Ferguson), they will never become the "wireless gorilla," no matter how hard one wishes that they might. They wanted to be. They aren't. They won't be. Lacking architectural control when they play outside their own domain and in the world of open comittee-based collaborative technology development and standards setting -- whether it be in the ETSI/3GPP jungle or in the IEEE jungle they are now foraging in, they simply do not have the same competitive advantage they enjoy within their own proprietary domain. Does that matter? It does in these respects: --> Without an architectural lock on the 3GSM UMTS (WCDMA, WEDGE, HEDGE, and TDD) ASIC side of their business they will never achieve anywhere close to the market share they have in wireless ICs in CDMA and to gain share they will have to sacrifice considerable margin as compared to CDMA chipsets, open their interfaces, and relax their supply agreement terms. --> They will need to spend more money, time, and effort, defending their IP than they ever have in the past and they will probably (or at least possibly) be forced to become more creative than ever to maintain their royalty rate at its current level, as the world moves slowly (but more rapidly than anticipated) to OFDM/OFDMA based access technologies. --> They will need to continue to spend on R&D and SG&A (assuming they charge standards involvement there) at a higher level as a percentage of sales than the market would like to see. --> They will have a challenge to maintain and grow their already weakened value chain, both in the CDMA ecosystem and the 3GSM ecosystem. --> They will increasingly have a challenge in encouraging adoption of their own proprietary open technology by wireless carriers for both CDMA2000 and other proprietary technologies like BREW, MediaFLO, and Scorpion (which I find very interesting). Challenges aside, their proprietary control of the architecture of CDMA provides them a solid foundation for adventures outside their native domain. I'm looking forward to this afternoon's earnings and expecting a very good quarter despite Samsung's and LG's lackluster reports which were offset somewhat by Motorola's exceptional quarter from a unit sales perspective, and the fact that they finally seem to be getting their mastery of CDMA under control despite the 'Q' delay. The market leader in WCDMA chipsets set a nice stage for them last night. Hopefully the market views the QCOM results favorably and hopefully there isn't too much already built into them. I suspect the whisper number is pretty high. Good luck to all that hold a chunk. Best, - Eric -