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

To: Ramsey Su who wrote (11837)	6/26/1998 1:17:00 PM
From: Greg B.	Read Replies (2) \| Respond to of 152472

3G Standards War Gets Personal as Ericsson Cries Foul By Sheridan Nye (Total Telecom) 26-JUN-98 Growing tensions over the US's choice of third generation mobile standard has prompted Ericsson to launch a fierce personal attack on a senior Lucent executive. The Swedish vendor claims an advisor to the US State Department blocked previous approval of the W-CDMA air interface in favor of the competing cdmaOne-based standard proposed by his employer, Lucent. The decision was unwarranted, said John Giere, Ericsson's vice president of government relations, as W-CDMA had already been accepted by US standards body, ANSI, and had fulfilled the criteria set by the committee advising the US government. Ericsson claimed the executive raised his objections at the "eleventh hour" and had changed his position since joining Lucent from another US telco. Giere claimed the committee's recommendation to drop W-CDMA from the US's approved list, since overturned by a higher advisory committee, represented "a flagrant misuse" of the assessment process. The US is deliberating the merits of various air-interface proposals to put forward to the International Telecommunication Union for inclusion in its umbrella group of standards for 3G, IMT-2000. W-CDMA the suggested solution proposed by Ericsson, Nokia and NTT's DoCoMo to upgrade current 'second generation' cellular networks for broadband data. In January, the European Telecoms Standards Institute agreed to propose a standard to the ITU incorporating elements both of W-CDMA and of wideband-TDMA, a system more closely related to GSM. The ITU will gather a number of different air-interface standards under its IMT-2000 banner, and the US's submission is highly influential in determining which will be chosen as part of the final recommendation. "Why should one technology be excluded?," asked an Ericsson spokesman, insisting that the US should maintain its traditional support for open standards by allowing the various options to compete in the market. European interests also have the support of the GSM Alliance of 12 operators using the system in the US and Canada, who want to see the ETSI-backed system go forward. But Lucent is among large US players with a clear interest in ensuring third generation systems are backwards compatible with current cdmaOne networks, in which it has a considerable domestic investment. Earlier this year, Qualcomm, which has similar concerns, confirmed it will not hand over vital intellectual property rights unless the ITU's 3G recommendation includes cdmaOne compatibility. In response, the third force in the argument, Japan's DoCoMo said it will develop a W-CDMA technology that avoids reliance on Qualcomm. Meanwhile, Lucent declared this week that it intends to pursue its own 3G technology based on cdmaOne, with roll out set for next year. Cdma 3G will double the voice capacity of cdmaOne and meet the performance criteria set by the ITU's IMT-2000, the company said. "This will be the first commercialisation of 3G technology within live, revenue-generating networks, not experimental prototypes," said Scott Erickson, Lucent's Asia-Pacific vice president of wireless networks. "It requires no network overlays, preserves existing base station investments, and best of all, allows network operators to simultaneously support current-generation and next generation subscribers." Meanwhile, Ericsson is persevering with its own wideband standard based on existing networks, Enhanced Data rates for GSM Expansion (EDGE).

To: Ramsey Su who wrote (11837)	6/26/1998 1:42:00 PM
From: JScurci	Read Replies (1) \| Respond to of 152472

Dear Ramsey, I have read Mr. Cabi's report and found it to be very carefully worded - carefully enough that is to be elements of fact laced with generous amounts of inneuendo. The fact that the 1900 Q had plastics problem is regurgitation of old news carefully crafted to leave the impression that this problem is both ongoing and continuing to the new dual-mode cellular Q. Mr. Cabi has had a long-standing antagonism toward Qualcomm where he has consistently had the lowest point estimate on the Street every quarter for years. The fact that his thinly veiled schilling for DMG client ERICY can be passed off as research is indeed a sad commentary on the Wall St. research process. Mr. Cabi's only legitimate constituency of Qualcomm players are those that are short the stock. This constituency was in need of a reprieve and Mr. Cabi rode in for the rescue. As recently as the day before the Alex Brown report there had been yet another new short sell recommendation written by a Washington D.C. based newsletter (CIFRA). Mr. Cabi felt it was time to rain on the parade started by Alex Brown's bullish report. The facts are that Qualcomm's business model is clearly improving as new growth drivers take over from the Korea factor. As even long cautious analysts like Brian Modoff od Alex Brown sense the turnaround coming they want to be sure to revise their opinion and get on the right side of the stock. Analysts like Cabi now realize they have a problem and are trying to make the best of a bad situation - that is - how to cover a short position in a stock with soon-to-be-apparent positive momentum. We should all be grateful that the best Mr. Cabi found in his quiver of tricks was an old re-hash of old and increasingly irrelevant and totally out of context manufacturing problems. Incidently, during a recent face to face meeting I had with Qualcomm management there was an unmistakable inference that current quarter handset revenues would be significantly ahead of the March quarter, and that was without significant shipments of the new Q which is ramping up nicely for the September qtr. These statements were also echoed in the recent Alex Brown report. regards, John

To: Ramsey Su who wrote (11837)	6/26/1998 1:43:00 PM
From: Gregg Powers	Read Replies (3) \| Respond to of 152472

Here's the story. I spoke with QC's Dick Grannis and he confirmed that the company has experienced issues with 'Q' phone plastics. He indicated that, as with the QCP situation, the problem has effected a limited number of phones and that the company has already provided for the related warranty expense in its financials. What I find rather exasperating is that it appears the February slowdown in 'Q' phone sales was related to both network performance (i.e. the oft-discussed "single-mode" issue) and to the company's need to rework the handset plastics. It appears that both factors influenced Sprint's decision to emphasize the QCP product family over the 'Q'. Grannis emphasized that the 'Q' phone issue is not, in any form or fashion, a new development and that related warranty expense has been "baked" into the company's June quarter guidance to Wall Street (translation: the company will not be blaming an "earnings shortfall" on the 'Q' phone). Recall that in the April conference call, management indicated that manufacturing gross profit margins would be roughly flat sequentially (i.e. in the June quarter). Given that the March quarter had suffered from the QCP rework expense, a shortfall in 'Q' sales to Sprint and a canceled 'Q' order to Korea (the Hansol contract), I had previously believed that management was being excessively conservative with its June quarter gross profit margin guidance. Believing that the QCP problems were behind the company, and that volumes were at record levels, I had believed that margin convexity was probable and, therefore, that it was likely we would have a better than expected June financial performance. Management's margin guidance has now been placed in context and it would seem less likely that the June quarter will be substantially better than Street concensus...although as I indicated before, the 'Q' phone issue should not cause the company to "miss" the June quarter. Grannis additionally indicated that the issue has been resolved and will not have any financial impact going forward (i.e. in the September quarter). Bottom line. The bad news is that the company has suffered another manufacturing snafu; that management was less than totally forthcoming in explaining this issue to shareholders (citing only problems with the QCP family last quarter); and that I apparently owe Tero an apology since I had emphatically contradicted his assertion that there were quality problems with the 'Q' phone. The good news is that management has addressed the issue; that it is baked into the company's earnings expectations for the current period; that it has not impacted the company's relationship with Sprint; and that it will not have an impact on prospective earnings. Finally, while I believe that Cabi has surfaced an "old" issue, that is not relevant to the company's forward prospects, I am more than a little annoyed that management was not more forthcoming on the topic. Hope this is helpful, Gregg