Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: tero kuittinen who wrote (10849)	5/24/1998 4:37:00 PM
From: RP Svoboda	Respond to of 152472

<<When Nokia started out manufacturing GSM phones, the initial profit margins were around 40%. Why? Because there was no digital phone competition. However, CDMA is coming late to the market and has to compete with entrenched competition from other digital standards. In this kind of squeeze, it's hard to envision a small company with no manufacturing experience, no brand, negligible market share and ruthless competition coming up roses.>> When I first began researching QCOM I was fearful of this exact issue. Although I cannot verify Nokia's numbers according to tero, I did realize that QCOM was facing a formidable challenge. So what has my research told me . . . Although I am not as eloquent as some on this thread. . . So what? If QCOM holders do not realize that this company is in its infancy then they did not accomplish DD. I have talked to many people smarter than I and the general consensus is that CDMA is by far and away a better technology than TDMA/GSM. Along with that, it is a relatively new technology and as a result, needs to get the bugs worked out. Since I have bought in for the long term, I watch very closely issues such as production difficulties, management placing too much emphasis on single mode phones, infrastructure build-out and the fact that a major CDMA carrier has gone through six software revisions in the past year and still has some glitches. Again, so what? I find that most management's timetables are overly aggressive and therefore I use a fudge factor to account for delays. I do not think that QCOM management is significantly off the desired mark and as a result, the stock still looks like an unbeatable buy at these levels. Tero talks about the relative stock performances between QCOM and Nokia. Again, QCOM is in its infancy. However, if you look at QCOMs price performance you will see nice price run-ups followed by strong drops on bad news. As far as I'm concerned, the market has already shown its cards. It has show us what it was willing to pay before the story has solidified and become even more compelling. It has shown us how rapidly the price will run-up once the "bugs" are worked out. It has shown us how quickly the stock momentum will turn positive once the infrastructure, handset and ASIC steam rollers gain their respective momentum. If you take the easy way out and extrapolate the stock performance over the past year (or so) into the future then you are doing yourself a disservice. I have taken the time to understand the technology and the business model and I think QCOM is the stock to own. I firmly belive that 5-10 years from now, I will be celebrating the success of this prediction. One final note, in case you are looking for the facts, figures and supporting links - There are none - this was just a rant. Thanks. Boda

To: tero kuittinen who wrote (10849)	5/24/1998 5:18:00 PM
From: JScurci	Read Replies (3) \| Respond to of 152472

Dear Tero, Aren't you that fickle fellow that works for Ericcson that was chased off this thread a few months ago for regurgitating the same old warmed up, worn out, leftover garbage from days past? As a representative of Ericcson it would be nice if in future posts you would be so kind as to disclosing your Nordic affiliations before singing yesterday's old GSM siren song. Speaking of GSM, how is it that we never hear about 3rd generation GSM. If GSM truly is God's gift to the wireless world, why is it then that our Nordic friends are feverishly working to develop some form of wide-band direct sequence spread spectrum technology - so called W-CDMA, and preferably one that uses as little of Qualcomm's IPR as possible? Could it be that GSM has finally reached the end of its road and that it can no longer be tweaked to achieve improved capacity and performance characteristics? Your description of Nokia as an industry juggernaut with a massive production base that is therefore impossible to compete with requires some perspective. As recently as late last year Nokia was the world's largest handset producer with production volume of some 1.5 million per month produced through 5 different production facilities and spread out over 5 different technology platforms: GSM, TDMA, PHS, CDMA, and Analog.Qualcomm by contrast,the company you say has no production experience, has current production volumes that will soon exceed 700,000 per month. Not bad for a company that is only twelve years old and only produced its first handset about 2 and a half years ago and is evidently already at about one-half of Nokia the current world leader's production rate. How long did you say Nokia's been making handsets? Looking closer at Qualcomm's handset production we see that all 700,000 per month comes from one production facility in San Diego, and in one single flavor: CDMA. Now Tero, I'm no efficiency expert but I'd bet my last Swedish Krona that Nokia's margins on its CDMA handset production couldn't hold a candle to Qualcomm's, especially since Nokia's production rate in CDMA is miniscule and they have to pay Qualcomm a royalty to boot. You say that new CDMA phones from such world leaders as Motorola and Nokia are technologically inferior. I agree. That's because both those companies felt so threatened by Qualcomm that they took it upon themselves to engineer their own CDMA chipsets which are relatively primitive next to Qualcomm's 4th generation version, which means that Motorola and Nokia CDMA handsets are "brick phones" that suck up power and thus have heavy battery requirements. You also say that only big wireless companies with big production volumes can succeed. Well being "big" certainly hasn't been of much help to Motorola which as recently as 1996 was the world leader in wireless handsets and through the early part of this decade "owned" the world mobile radio market with an estimated 80% market share. Being "big" is not better than being right.And what makes Qualcomm "right" is that it is 100% CDMA which is the fastest growing wirless technology platform.Your musings on the economic conditions in Korea and Japan also begs a response. Now Tero, I'm no economist but I do know that in spite of these adverse economic conditions Korea added more than 1.5 million new CDMA subscribers during the first quarter of this year and that Japan which currently has 31 million wireless subscribers is still adding new ones at the rate of more than one million per month - and that's before the Japanese get to sign up for new, improved CDMA next month. Finally Tero, you speak of "failed predictions" by Qualcomm and CDMA. What about the failed predictions from your Nordic camp?- First it was that CDMA was a hoax and that it didn't work, then that even if it did work that nobody would ever use it, then that if somebody did use it that the system would crash when fully loaded. Tero, in the "failed predictions" arena the Swedes truly are the best - their latest : "We've got something better than CDMA its called W-CDMA and its coming soon to a base station near you but in the meantime won't you please buy a few more antiquated barrels of GSM?" Get real Tero. Regards, John

To: tero kuittinen who wrote (10849)	5/25/1998 2:08:00 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 152472

True enough Tero! It's good to see how reality matches what was expected. Yes, 1998 was going to be the lift off year for Qualcomm as far as I was concerned. At the beginning of 1997, there was cdmaOne activity in Korea and the USA was just getting going. By the end of 1997, all technical doubts were gone and it was a question of how far, how fast. I'd predicted 7.34159 million cdmaOne handsets extant by the end of 1997 early in 1997 and got that about right. Then during 1997 I thought 1998 would be the first real year of substantial growth with many suppliers crowding in. And here they come. Including Nokia which is doing an absolutely excellent job in the wireless industry from all I see. I'd thought $53 per share would be the low of the new trading range [predicted about mid 1997]. With $83 the high. It got to $72. Then there was panic over Korea, so it dropped just out the bottom of my range. Now, looking at QCOM vs ERICY share prices over the period Qualcomm has been public. Qualcomm has gone from $10 to $56 since IPO in 1991. Ericsson from $5 in 1990 to $28 in 1998. And Ericsson has paid dividends. So Ericsson is ahead by the dividends. But these things are a little up and down, so they are much the same really. What really matters is what will happen from here. Ericsson has got enormous market share, brand awareness, experience and all that stuff. Qualcomm owns the new technology which even Ericsson now admits does work. More later, but on those scores anyway, Qualcomm is doing very well for a company that was a fraud, with technology that broke the laws of physics. I think 1998 is so far the lift off year. About 10 million handsets being used. Many handset makers underway. Japan launching. Korea growing. China getting underway. WLL selling now. Globalstar operational. By the end of 1998, things will be looking more substantial than the pretty good position now evident. Maurice

To: tero kuittinen who wrote (10849)	5/25/1998 4:00:00 AM
From: Maurice Winn	Read Replies (1) \| Respond to of 152472

Tero, picking your post apart a bit more: You said: "First of all, by now it should be obvious that GSM's main advantages; wide customer base, large production volumes and unique strength in handset manufacturing have given it viable in a way that most CDMA-supported did not predict in 1996. There are now no realistic prospects that CDMA will overtake GSM in the foreseeable future." Any old technology has the same advantages over new. All that matters is the relative advantage of the new. A small difference might see the new one never catch up. A big difference will see it happen quickly. CDMA has substantial advantages over GSM. The rate of takeover is guesswork, but quick. As you say, handset design and quality is a big part of the equation, and GSM has enjoyed a long advantage there. But that is changing with Palm Pilot, Unwired Planet etc coming up quickly. Nokia will put lots of effort into making cdmaOne as successful as they can, which won't take them long, to ensure they gain a big market share. They won't leave cdmaOne as a backstop to GSM. No reason to do so. They'll put effort where the sales and profits over the next 5 years will be. GSM to be sure, but they won't want to be 10th in line in cmdaOne either. Maurice

To: tero kuittinen who wrote (10849)	5/25/1998 12:01:00 PM
From: John Biddle	Respond to of 152472

Tero, Calculating Qualcomm's handset margins is complicated by the Sony/Qualcomm joint venture. A significant portion of the product of QPE (the joint venture) is sold to Sony at wholesale. This makes the reported margin look very small when it really isn't. For a more complete explanation, I refer you to this post of Greg Powers. exchange2000.com

To: tero kuittinen who wrote (10849)	6/2/1998 9:51:00 PM
From: Maurice Winn	Read Replies (1) \| Respond to of 152472

Tero, just reviewing that post again, much of what you say is true, but underlying it all is the future prospects for cdmaOne versus GSM. There is nobody saying GSM is the 3G system. All agree that it is just a transitory technology to be followed by 3G CDMA, of either an Ericsson or cdmaOne variety. So at some stage, CDMA will exceed GSM. The question is when. You also tend to belabor Korea too much. It is small in the world. China is not all GSM - they are also keen on cdmaOne. Yes, Nokia has done a brilliant job and both Nokia and Ericsson have enjoyed a great record until now. Postmortems are fine by me! My investments are great. I predicted a $53 to $83 trading range for Qualcomm about 10 months ago. That was about right too. But a postmortem is premature when cdmaOne is barely out of the starting gates. It has been just over 2 years since the first commercial systems started. Growth has been good. Technology developments continue apace and it seems likely that cdmaOne will be accepted as the logical basis for wideband cdma wireless telephony. This rule you gave: "There's a rule in high tech businesses in general that states that only companies with big volumes can be truly successful." It can't be true. Or there would never be a new company in high tech businesses. Compaq, Apple, Microsoft, Qualcomm, all started with small volumes. To be a big company, of course there needs to be a big market and eventually big volumes. Qualcomm is aiming at one of the biggest volumes the world has ever seen. cdmaOne will be ubiquitous. Not just in phones. Mqurice