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Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Caxton Rhodes who wrote (1878)	5/4/1999 8:43:00 AM
From: tero kuittinen	Read Replies (3) \| Respond to of 34857

It will be interesting to see whether the Japanese companies can take a big chunk of the W-CDMA handset sales. NTT-Docomo seems intent on giving them a big push. I don't doubt that the Japanese can hog 60-70% of the Japanese 3G handset market - but they have not been doing well outside of Japan. Panasonic or NEC aren't the kind of brands that have appealed to GSM phone buyers - not even in China or other Asian countries. The way I see it, splitting even 30-40% of the Japanese W-CDMA phone sales between them would be a big win for Nokia, Motorola and Ericsson. Nokia has now around 7% of the Japanese handset market. This may seem like a joke, but at least the Japanese recognize Nokia as a phone maker. Ericsson and Motorola have to build up brands from a scratch. Nokia's design should count for something - some Ericsson exec has already sniffed that a phone should look like a phone, not a soap. Ericsson's 3G designs seem to continue along the utilitarian, boxy 1985 Volvo lines. I think that a phone that looks like a soap just might be the ticket. The soap strategy sure worked for iMac and 5110. Of course, the reverse is true as well - if Japanese can get even 30% of European W-CDMA sales they can declare victory, since right now they can't keep up even with Alcatel. I have a hard time seeing Motorola pull ahead here - they seem to have a very low W-CDMA profile. If the Japanese get ahead in the W-CDMA race it poses some investing problems. Who's going to buy Matsushita shares, no matter how well they do in W-CDMA? Clark - that point about Qcom sales growth was valid. The company did not break down the sales numbers. I don't see how infra sales could have dragged down the handset/chipset sales growth from 50% to 24%. Didn't Qualcomm say that network sales are picking up before they sold the division? And isn't Omnitracks minuscule compared to handset/chipset department? Looking at the overall CDMA subscriber growth and adding the replacement sales to that I don't see how the global CDMA handset/chipset growth could have been lower than 100% during last quarter. I'm not sure what to think of this "price erosion" explanation. If Nokia's price erosion is 20%, how on earth can CDMA phones have a substantially higher number with their triple-number sales growth? Could Sony's admitted 50% handset price erosion tie into this? Is this telling us something about the relative profitability of selling CDMA and GSM handsets? The markets seem to currently assume that CDMA phones should be at least as profitable as GSM and TDMA phones. Clark - wouldn't you say that the Qualcomm sales growth is somewhere between 30-50% of the overall CDMA handset/chipset sales growth? I'm not saying that this has to be lethal - but it is weird and something that should be balanced against the projected licensing revenue growth. Qualcomm's position as the creator of IS-95 should have been strong enough to help the company at least match the industry growth. There was very little competition last quarter in the CDMA handset market. It's going to get a whole lot tougher. Nokia and Motorola have nothing to lose in CDMA handset market - every share point they gain is a bonus. They can use profits from GSM and TDMA sales and shared components from 10-million unit selling models to trample the CDMA phone prices as much as they want. Qualcomm does not seem to have much production capacity in handsets and they are extremely cautious in bulding more. They seem to be saying that the phone production capacity will go up just moderately, to 1 million units per month at the year's end. This does not display much confidence in their ability to match the market growth in the future. OK - they get licensing fees from Motorola and Nokia models as well. But they won't get chipset sales from there. I don't have any confidence in Asian manufacturers being able to hold the line against Motorola and Nokia. It boils down to the licensing revenue issue. Maybe Qualcomm is even now negotiating the sales of the handset unit to some Asian company and the whole handset problem will become moot with time. Before it does, Qualcomm is riskier than Nokia. I think that's at the core of this debate - when you look at the P/E ratios of Qualcomm, Cisco, Lucent, etc. you see that the markets are assuming that American IT companies are far less risky and/or far more likely to grow faster than their European counterparts. I don't think that this is supported by any evidence. Markets are already pricing in falling margins for Nokia and rising margins for Qualcomm. What exactly is the rationale behind that? Tero