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Qualcomm sets cat among Wi-Fi pigeons with Airgo purchase
Political pawn or technology asset?
http://www.theregister.co.uk/2006/12/08/qualcomm_airgo_purchase/
Cell-phone gadgetry is just getting started
Wireless providers are stepping up to make your phone an MP3 player, a TV and a full-fledged computer in a new round of phone wars. Three tech providers should be among the big winners.
http://articles.moneycentral.msn.com/Investing/CompanyFocus/CellPhoneGadgetryIsJustGettingStarted.as....
Verizon Wireless better be ready to update its "hear me now" catchphrase: Giving folks audio-only cell phones (even with cameras) won't cut it for long. The next round of winners in the cellular world will be the ones offering music and video along with the latest round of whiz-bang new phone functions.
Sorting out the winners will be no easy task, as the competition will be fierce. For investors, figuring out which companies will come out on top could be as lucrative as the last round of cell-phone wars, when companies such as Nokia (NOK, news, msgs) and Qualcomm (QCOM, news, msgs) saw their stock prices as much as double between 2002 and 2004. In a minute, I'll give you my three picks. But first, a little background.
In a minute, I'll give you my three picks. But first, a little background.
Generation next
Verizon Wireless, a joint venture of Verizon Communications (VZ, news, msgs) and Vodafone Group (VOD, news, msgs), got the jump in this latest round of competition by adding YouTube video to its V Cast media service this month. It also signed a deal with Revver, another video-sharing Web site that hosts user-generated content.
The main wireless providers in the U.S. -- Sprint Nextel (S, news, msgs), Cingular Wireless and Verizon Wireless -- all are bumping up cell-phone bandwidth to long-awaited "3G," as in third-generation, technology that can provide video and data transmission at speeds close to that of DSL.
Sprint is rolling out a more sophisticated version of its technology called EV-DO Revision A. It can provide download speeds of up to 800 kilobits per second, compared with speeds of about 500 kilobits per second now.
But the real improvement comes in upload speeds -- a change that will pave the way for two-way video conferencing. Upload speeds should increase to 300 to 400 kilobits per second, from around 50 kilobits per second now. Verizon Wireless is making similar upgrades.
Meanwhile, Cingular is bringing out an improvement to its service called "high-speed downlink packet access." This will increase download speeds to 400 to 700 kilobits per second and upload speeds to 400 to 600 kilobits per second by the end of 2007.
In addition to faster speeds, these upgrades will also bring better-quality service because fewer data packets will drop out.
Cell-phone companies will put in even wider pipes over the next two years, in the form of Wi-Fi and WiMAX. These will support blazing speeds, similar to what you get with cable connections. These higher speeds will bring features such as interactive gaming to cell phones. Embedded wireless connections might let you stream live video straight from your camcorder to relatives who couldn't make it back for the holidays.
"The general message is you start to get a very good broadband capacity either from those two cellular roots or from Wi-Fi and WiMAX," says Nigel Rundstrom, who heads the North American multimedia group at Nokia. "Then many of the services that consumers would like to use become more viable."
But do consumers really want to watch "Gone With the Wind" on their cell phones?
David Owens, the director of product marketing at Sprint, concedes that few people will go for a two-hour movie on a small cell-phone screen. But he thinks most people these days are "video-centric," meaning they prefer to get information through video. And they like short bursts of information in videos lasting a minute or two. "Our belief is there is a tremendous appetite for the one-and-a-half-minute clip on handset," Owens says.
More intriguing is the YouTube phenomenon, says Nokia's Rundstrom. "A lot of the traffic from social-networking sites, whether it is MySpace or Flickr or YouTube, will migrate to mobile phones," he says.
Another popular service will be live broadcast video. Chris White, the director of multimedia-products strategy at Motorola (MOT, news, msgs), thinks that will take about 18 months.
Then there's music. Cell-phone service providers hadn't anticipated the popularity, and profitability, of ring tones, which generated $4 billion for carriers worldwide in 2004.
Now they're hoping for a repeat in music. "We believe that full-song music has a similar, if not a more promising, outlook for the carriers," says Lazard Capital Markets analyst Christin Armacost.
Cell-phone providers aren't waiting for Steve Jobs to release an "iPhone." They already offer several phones that double as music players. Users pay extra for a memory card that can store 500 to 1,000 songs, similar to the capacity of the iPod nano from Apple Computer (AAPL, news, msgs).
Carriers offer music through online shops similar to the Apple's popular iTunes service. But cell-phone users typically buy songs using their desktop computers and then load them into their cell phones. With high-speed cell service, more users will likely download straight to their phones.
What's the best way to play this trend? The cleanest 3G plays are the "arms suppliers" (forgive the tech-bubble speak), the companies selling the technology to make it happen. Lazard Capital Markets' Armacost prefers Qualcomm and two smaller companies, Radvision (RVSN, news, msgs) and Smith Micro Software (SMSI, news, msgs).
Qualcomm
lcomm is in the "enviable" position of owning much of the intellectual property behind CDMA, one of the dominant standards in wireless communications, says Morningstar (MORN, news, msgs) analyst John Slack. Qualcomm makes money by designing chips used in CDMA phones and by collecting royalties on other companies' sales of handsets that use CDMA technology.
Qualcomm also recently won a supply contract with Motorola, a deal that means Qualcomm will see a healthy gain in its share of the 3G chip market, says Goldman Sachs (GS, news, msgs) analyst Brantley Thompson.
The transition to 3G technology is a big boost for Qualcomm. The switch will boost demand for both CDMA chips and new 3G-capable handsets.
Next, Qualcomm offers one of two leading technologies supporting mobile video broadcasting, called MediaFLO. Qualcomm scored a victory this year when Verizon Wireless adopted MediaFLO as the platform for its video service. "We believe this high-profile partnership will provide a meaningful catalyst for drawing in other service providers to the MediaFLO platform," says Prudential Equity Group's Inder Singh.
Qualcomm is locked in battle with Nokia, which believes Qualcomm's royalties are too high. Qualcomm is also suing Nokia, claiming patent infringement. Uncertainty about the quagmire has probably shaved $5 off Qualcomm's stock price, says Lazard Capital Markets' Armacost. But she thinks Qualcomm will ultimately prevail -- one reason she has a $58 price target on the stock.
Radvision
Based in Tel Aviv, Israel, Radvision develops and markets components for networking gear used to support video communications over the Internet. For years, Radvision has focused on offering equipment for traditional videoconferences.
This year, the company has seen rapid growth in sales of network gateways that support videoconferencing through 3G mobile phones and on desktop computers. These segments account for about a third of Radvision revenue, and they will grow by about 85% and 50% next year, Armacost says. "As we move into 2007, we expect to see some larger-scale 3G video deployments in Europe and Asia and a number of initial trials in North America," she says.
Radvision boasts an impressive list of partners, including Alcatel Lucent (ALU, news, msgs), Nokia, Hewlett-Packard (HPQ, news, msgs) and Siemens (SI, news, msgs). Radvision, whose stock trades for about $20, has around $4 per share in cash and no debt. It produced healthy operating cash flow of $3.7 million in third quarter, and it is buying back stock.
Smith Micro Software
Smith Micro sells software that helps manage the flow of digital content to wireless devices such handsets and laptops connected to carrier networks. Its software is used on wireless modem cards. But Smith Micro also has several stand-alone software products that help manage digital content on your cell phone.
One is called Music Essentials Kit. It's a system for downloading music from online stores to your desktop, managing play lists and transferring music to handsets. Another is a line of compression technology offerings called StuffIt that help reduce the size of digital files such as photos.
Smith Micro's largest customer is Verizon Wireless -- both a blessing and a curse. Verizon's success with V Cast and its rollout of 3G mobile phone service is a plus. But Smith Micro gets about 70% of its revenue from Verizon Wireless. That's risky because you don't want companies you invest in to be too dependent on any single customer.
But Armacost thinks Smith Micro will widen its customer base and continue to grow earnings at a double-digit pace for several years. So she has a $24 price target on the stock, which recently traded for $16.
Expert Picks
With this column, I'll add both Qualcomm and Sprint to my Company Focus model portfolio in our Expert Picks section, and we'll track how they do from here.
At the time of publication, Michael Brush did not own or control shares of any companies mentioned in this column.
Qualcomm's Empire Is Under Siege
Posted on Nov 28th, 2006 with stocks: BRCM, ERIC, NOK, QCOM, TXN
http://wireless.seekingalpha.com/article/21316
Keith McMahon submits: Over the weekend, I was catching up on my missed event list and was fascinated with the Qualcomm (QCOM) London Investor Roadshow from Nov 11th. I was horrified when the CFO, Bill Keitel, mentioned that QCOM legal bill during FY06 had increased by US$100m and was expected to increase by another US$100m during FY07. It is scandalous that the biggest beneficiary of 3G technology seems to be the legal profession.
The reason that QCOM legal bill seems to be completely out of control is that QCOM have resorted to law to defend itself against three big beasts trying to dismantle its empire. The empire itself is worth a lot of money: Friday’s closing of US$37.58 gives a market capitalisation of US$62.1bn. Net cash of US$9.9bn gives an Enterprise Value of US$52.2bn. QCOM generated in 2006 Free Cash Flow US$2.6m so the yield is 5% which is actually quite low for a company in a pivotal position in a high growth industry. To me, the stock market is saying they think QCOM’s empire is in decline.
So who is fighting QCOM and why?
Group 1: Nokia (NOK), Ericsson (ERIC) and Texas Instruments (TXN)
These are the key people complaining to the EU that QCOM is using anti-competitive behaviour. I know that it is difficult to believe that the World #1 Mobile Handset Maker, the World #1 Mobile Infrastructure Maker and the world #1 Mobile Chip Maker are whinging to the EU and the fact they are involving politicians seems to me to indicate just how poor their negotiating position is. However, this is nothing new and QCOM was only allowed a seat at the 3G table in the first place after the US government got involved with its EU counterparts in the debate. Realistically, once the negotiating has got to the level of irrational politicians – any outcome is possible and associated with any uncertainty is a discount in valuation for QCOM.
Two facts stood out from the presentation: NOK royalty payments to QCOM have increased by 900% since 2001 and sales of WCDMA handsets by value (62%) have overtaken GSM handsets (38%) in the June ’06 quarter.
In 2001, NOKs Mobile Phone Division had a turnover of €23,158m and Operating Profit of €4,521. In 2005, NOK divisions relating to the sale of Mobile Phones (Mobile Phones, Multimedia and Enterprise) had a turnover of €27,653m and an Operating Profit of €4,176m. Meanwhile, over in QCOM land over the same period revenues have grown from US$651m to US$7.526m and Earnings before Tax have grown from US$234m to US$3,156m. So, in the five year period since 3G was introduced, NOKs handset profits have fallen by €345m, whilst QCOMs profits have increased by US$2,922m. You can see why NOK would try and renegotiate the 5% royalty rate. The fear factor for NOK is that one day soon all phones sold will contain CDMA technology and therefore they will be paying 5% of revenue for every phone sold over to QCOM.
As a chip maker, TXN is a completely different story and I can only think that their complaint is QCOM leveraging its royalties to give them an unfair advantage in chip pricing. However, I’m struggling to see this in terms of market share: it looks from some TXN investor slides that they have greater than 50% market share in the WCDMA market. In terms of overall wireless market, TXN figures show they had an increasing 18% share whereas QCOM had a declining 14% share.
However, there are two recent wireless chip events which will worry TXN. The first is the design win by QCOM at Motorola (MOT). MOT has traditionally used Freescale (FSL) as their chip manufacturer, which is hardly surprising given that FSL used to be a division within MOT. QCOM will have to work hard to gain a large share of the MOT business, but the door of the MOT building is ajar. Second the demise of Siemens Mobile will cause some turmoil in the GSM chip market, not least for Infineon which was the Siemens chip manufacturer. In fact, if I was a major player in the GSM equipment market, I’d be extremely worried about a major patent holder, Siemens Mobile now part of BenQ, will be looking for a way to earn a return on a loss making investment. The experience of Interdigital with NOK seems to show that litigation has the potential to provide a decent return.
The other factor at play here is the trend towards single chip solutions which requires a lot of innovation, multi-skilled engineering teams and deep patent portfolios to be successful. Both TI and QCOM seem to have detailed plans to make the transition – I’m not so sure about the rest of the industry, but this is through personal ignorance rather than a statement of fact.
All of these factors seem to spell to me that the next step is consolidation within the wireless chip industry. Therefore, I feel TXN will be focussed on more pressing matters than litigation and probably have added their name to the complaint to lend emotional support to their #1 customer NOK. After all, the chance of EU politicians giving a sympathetic ear to a US multi-national is next to zero.
On the infrastructure side, I suspect Ericsson (ERIC) is far more concerned about the rise of the Chinese vendors, especially Huawei. The QCOM business model of licensing patents to all and sundry actually levels the playing field and I think ERIC will want to retain its competitive advantage. In addition to the infrastructure business, ERIC has a fabless chip business and of course retains part ownership of the SonyEricsson mobile phone venture, so ERIC will have the same handset concerns as NOK and chip concerns as TXN.
Therefore, it seems that the stakes are really high in this round of WCDMA negotiations and the positions really boil down to:
• NOK, ERIC and TXN want lower royalties and to keep their competitive advantage against smaller industry players; and
• QCOM want to keep the status quo.
There is plenty of middle ground for a settlement, but I suspect time will pass and a lot noise will created before pen is put to paper on any sort of settlement agreements. Meanwhile the shareholders are hurt as valuations reflect uncertainly and the industry is hurt as profits move out to the legal profession.
Group 2: Broadcom (BRCM)
Although, BRCM is one of the parties crying foul to the EU compliant, it is the litigation in the US courts which is interest. The general impression I got from the call is that the BRCM proceedings are a bit of a distraction from the main event which has next to zero chance of success. QCOM also mentioned that BRCM had been playing foul and had actually stole secrets from QCOM and hence the QCOM litigation against BRCM in January.
I just see the whole chapter as a classic example of an aggressive company trying to enter a market. After all, Silicon companies seem to be more addicted to lawyers than to sand.
Group 3: The Wimax Gang
The WIMAX gang are basically trying to muscle the wireless market away from the current CDMA world and into a not-so-brave-but-highly-lucrative new future. Personally, I think this fight is almost over with CDMA emerging a champion and the WIMAX crowd will probably retreat to some small niche market like backhaul. Given the size of the wireless market and potential for future growth, it is hardly surprising that Intel and the rest of the gang would make a play for the market.
QCOM and the 3GPP/3GPP2 standards bodies have actually put up a really good fight in the technological capacity game. There is now so much confusion and vapourware in the press that no-one can be absolutely certain whose system offers the most bang for bucks.
There is also the myth that Wimax royalties will be low or very close to zero. I actually take the QCOM party line here and believe this is absolute nonsense. QCOM estimated that the WIMAX key patent pool contains 1,550 patents owned by 330 companies. Even if we allow for outrageous exaggeration, we are still left with a large number of companies to keep in check. It will only take one to break ranks and litigate for the whole licensing pack of cards to collapse. QCOM use the example of a bankrupt company taking on the big boys, like the infamous NTP taking on RIM. This is obviously the politically correct version of future events, because QCOM actually claim to hold a number of key WIMAX patents and I have no doubt that QCOM will litigate at a time and place of their choosing. I suspect a part of the increased legal bill at QCOM is being spent prepared litigation against the WIMAX gang.
There is also a general consensus that electronics only play a small part in the overall price equation compared to spectrum acquisition, site acquisition and operating costs. Therefore, it was always vitally important for the WIMAX gang to convince operators to move to their technology. I can only think of one major operator, Sprint Nextel, who has been conned, sorry convinced. Sprint are in such disarray that frankly I wouldn’t be surprised at anything they do and I seriously doubt whether the executive decision makers will be around at the time (if ever) the WIMAX service reaches profitability. If the WIMAX don’t convince anyone else soon, they may as well pack up and go home.
While we are examining the lack of threat of WIMAX to the QCOM business model, we should also examine the frequently heard “CDMA is dying” and will be replaced in the long run by GSM/WCDMA, obviously for the GSM-only crew this is great story to spread.
The basic problem for QCOM is that it is a complete truism that GSM has completely trounced CDMA and TDMA before it as a technology. This is manifesting itself in the economies of scale which are bringing cheaper handsets to key low cost markets. Vivo has struggled so much in Brasil that it is now building a GSM overlay market and seemingly moving away from CDMA. In India, there is a lot of public pressure from the CDMA operators (Reliance and Tata) to lower the cost of CDMA handsets to GSM levels. In China, China Mobile is showing far higher growth than China Unicom, the CDMA operator. Nobody can doubt these facts and it is really vital for QCOM to get the costs of handsets down so that the playing field is balanced. I see QCOM fighting back with its single chip solutions, but whether it is enough will be open to question, after all by the time the single chip solution is released the GSM market will have moved on. The real damage here is that NOK-et-all use the argument GSM has won because of the level of QCOM royalties, whereas the truth may be something to do with economies of scale.
I also feel that with the future deployment of 3G technology in emerging markets that some of these economies of scale questions will be answered. I take the opposite position to the cynics who believe that emerging markets will remain voice and text markets, I think that ultimately 3G technologies will spread and the use in the emerging world may actually be heavier than in the developed world because of the lack of fixed-line infrastructure in a lot of these countries.
In we look at the world’s biggest cellular markets in terms of value rather than volume the situation is rather different. In the USA, Verizon Wireless is the top performer and in Japan, KDDI is the top performer, both of whom use QCOM CDMA technology. In Western Europe CDMA has effectively historically been barred from the market by politicians. Again, we can argue what is the real root cause of this success and I have a lot of sympathy with the conclusion that, for instance, Verizon Wireless because of its management strength would be successful whatever technology they used.
I also think that QCOM will never allow CDMA to die and be replaced by WCDMA in the long run. This is because it needs a technology which provides a test bed for its innovation without having to get the technology approved by a hostile committee. Also, I think Verizon Wireless and KDDI will be more than grateful of the opportunity to differentiate its service, something that the European operators would die for.
In short, I don’t believe that WIMAX poses a short, medium or long term threat to QCOM. I also don’t believe that CDMA will die, although I agree that GSM will enjoy economies of scale advantages for the foreseeable future in emerging economies.
As well as building up legal billable hours, QCOM is busy moving ahead and spreading itself into two key new markets.
MobileTV
I am personally extremely excited about the size of the MobileTV opportunity. In the long run, I see almost everyone, whether on a mobile or some other device, having and watching mobile TV. I think QCOM is playing it extremely smart in designing its own air interface, MediaFlo, securing spectrum and deploying a network. The MediaFlo network build-out was named as the determining factor in the losses of US$133m in the Strategic Investments segment. QCOM already has signed up the key anchor tenant for this network in Verizon Wireless and I predict a lot more regional operators will sign up when the economics are proven in the major cities.
Use of the Strategic Investments division to seed a market with new technology is nothing new to QCOM and to me gives an indication of the size and commitment to specific technologies. It is also a strategic advantage, because you would never see NOK or ERIC taking this approach. For sure they might make a few loans and take a minority position, but securing spectrum and taking a 100% risk is not in their play book.
Qualcomm seem to taking a similar approach in Japan, however this time they are sharing the risk with KDDI which makes sense. I’m also going to predict that QCOM will take a big risk in the UK and take the same approach as in the USA. I’m not sure whether they will bid on the L-Band alone or with BSkyB or in a remote scenario a joint QCOM/BSkyB/Vodafone. However, I’m sure they finally see the opportunity of building a decent sized European business and more importantly beach-head to fortress Europe.
I also think QCOM are being really smart in developing a multi-mode chip for all the competing MobileTV standards. If QCOM can build this at the same price as single mode (DVB-H, DAB) chips then it will prove that supporting multiple standards is not as big an overhead as some people make it. It also de-risks the decision to put MediaFlo support in handsets for the manufacturers. Most ingeniously, it makes the decision of air interface purely on the performance of the air interface. All I can say is that QCOM must be confident of MediaFlo outperforming DVB-H.
Operating Platforms
I’m not sure to how describe the BREW and uiONE software platforms, but they seem to gaining traction, of note is the recent wins at o2 and TIM, these are big wins. It is apparent that QCOM is taking a radically different approach with supporting operators to NOK-et-all - this is a huge strength of QCOM and the benefits should be strong in the long run. Successfully working with Vodafone to launch integrated circuits for PCs and providing all the assistance to design an extremely cheap Vodafone branded 3G phone. This has been done at a time when tensions between the operators and traditional handset manufacturers are high and more or less guarantee a willing ear for any new technology proposed by QCOM to the operators. I suspect that QCOM is trying to squeeze the value chain into Intellectual Property Owner, Chip Maker and Software Provider ie Qualcomm, Device Assembler ie Huawei or whoever and Service Provider ie O2, Vodafone-et-all.
Conclusion
In the long run that the company with largest amount of brain power will win the day and there can be doubt that some of the biggest brains and innovators in the cellular industry reside at the QCOM headquarters. It is for this reason that I predict that QCOM will ultimately prevail and claim more and more of the wireless value chain and profits.
However, I also believe that the general growth in wireless will allow plenty of profits to keep the NOK, ERIC and TXN shareholders happy if not ecstatic. This outcome is far from certain and a very risky call - in fact far too risky for me to recommend to anyone purchasing QCOM shares, let alone NOK, ERIC or TXN.
What is certain is that the big winners in the short term will be the patent lawyers and political lobbyists, however I don’t know any publicly quoted ones to recommend.
Qualcomm plays to its strengths with Snapdragon launch
And Motorola deal
Page: 1 2 Next > By Faultline ? More by this authorPublished Friday 24th November 2006 13:54 GMT
http://www.theregister.co.uk/2006/11/24/qualcomm_snapdragon_launch/
Jacobs: Qualcomm becoming ‘very much of a law firm’
By Jeffrey Silva
Nov 15, 2006
http://rcrnews.com/news.cms?newsId=27770
WASHINGTON—Qualcomm Inc. Chairman Irwin Jacobs said he believes the San Diego-based CDMA technology firm is entering a new phase of heightened regulatory and antitrust scrutiny around the world.
Jacobs, speaking at a conference at George Mason University Law School, said Qualcomm has overcome major challenges in getting CDMA technology accepted, particularly in the European Union, only to face new obstacles.
“There are several companies that used to say CDMA would not work but suddenly switched over to call us a monopoly because of the fact that we have a lot of the intellectual property rights, so they made a complaint to the EU,” said Jacobs, adding: “We’re not the largest chip supplier of CDMA.”
Jacobs, who said he disagrees with the monopoly tag, acknowledged that probes in the EU and Asia have forced Qualcomm into a new operating mode.
“I think the issues are switching to the kind of regulatory and antitrust issues” that Qualcomm did not have to deal with during its evolution from a research and development company to a hardware manufacturer to its present iteration as a major wireless chipmaker and software vendor, said Jacobs.
He added: “Now I think we’ve become very much of a law firm.”
Jacobs said he believes the new regulatory and antitrust issues are going to follow Qualcomm well into the future.
Last week, Qualcomm said it has been notified by the Japan Fair Trade Commission that the agency may investigate its licensing and chip business practices in Japan. The JFTC didn’t disclose any specific complaint, Qualcomm said, or reveal the timing of any potential investigation.
Notice of a potential Japanese government probe follows the EU investigation into “anti-competitive conduct” accusations by a half-dozen companies against Qualcomm. Korean regulators also raided the company's offices earlier this year in response to similar complaints.
Motorola, Qualcomm Renew Bond
http://www.redherring.com/Article.aspx?a=19716&hed=Motorola%2C+Qualcomm+Renew+Bond§or=In....
Chipmaker and handset manufacturer find each other again in stalled 3G market.
November 13, 2006
The chill is gone from the Motorola/Qualcomm relationship as the two United States-based companies said Monday that phone maker Motorola will use Qualcomm’s UMTS chipsets to improve its options and fortunes in the third generation (3G) market.
The single-chip system will help drive down costs and assist Motorola with introducing new and interesting cell phone applications in its slow global 3G market.
The two companies will collaborate on CDMA2000, a 3G mobile technology, and UMTS (universal mobile telecommunications system), a competing CDMA (code division multiple access)-related 3G technology.
“The relationship between Motorola and Qualcomm has evolved over many years and it hasn’t always been as amicable as the two companies would like it to be, but Qualcomm gives Motorola a supplier who can spread its R&D cost among multiple handset makers,” said Joe Nordgaard, director of the wireless consulting firm Spectral Advantage.
‘The relationship between Motorola and Qualcomm has evolved over many years and it hasn’t always been as amicable as the two companies would like it to be.’
-Joe Nordgaard,
Spectral Advantage
- ADVERTISEMENT -
As a customer, Motorola helped Qualcomm develop and refine its CDMA technology, but over the years there were tensions that date back as far as when Qualcomm was actually in the handset market.
But with the increasingly complex demands of the very competitive and diverse mobile market, Motorola has been casting about for more options and less expensive, more streamlined components.
Shares of Motorola rose $0.12 to $21.50 in recent trading, while Qualcomm shares climbed $0.81 to $36.05.
Freescale Freedom
To date Motorola’s primary supplier of 3G components has been Freescale Semiconductor, a Motorola spin-off. Freescale went public two years ago, and two months ago the company was bought out for $17.6 billion, or $40 per share, by a consortium led by the Blackstone Group.
The purchase has complicated matters to some extent for Motorola.
“We have been anticipating [the Qualcomm] move for some time,” Richard Windsor of Nomura Securities said in a statement. “Motorola has been faring very poorly in 3G, which combined with the privatization of Freescale has left it in a difficult position in relation to its 3G chip-sourcing strategy.”
Qualcomm’s single-chip technology helps push Motorola’s costs down, but just the option of having another large component supplier firmly on board places Motorola in a better competitive position, particularly against market leader Nokia.
More to Come
“Getting the cost of the handset down is a major obstacle, but the next one is designing phones that users actually want and with features and applications they will be willing to pay for,” said Mr. Nordgaard.
The 3G market has emerged slowly as cell phone users have not beaten down the gates for data services outside of a small handful of applications, but vendors are hoping that bringing the cost of the 3G handsets down will spur the market.
“We believe that these new chipsets have been developed with Motorola in mind and we expect that handsets should begin to ship in mid-2008,” Mr. Windsor said. “Qualcomm has already opened its chipsets for Linux, and we think that the software integration roadmap has already been finalized.”
Contact the writer: CMedford@RedHerring.com
Nov 13, 2006Qualcomm Makes Headway in Europe and Against Nokia
NOV 13, 2006 10:37:00 AM | Add Comment (0) | Permalink
http://www.cio.com/blog_view.html?CID=26612
Motorola will use Qualcomm chips in future Universal Mobile Telecommunications Service (UMTS) phones in a deal that could give Qualcomm leverage in an ongoing patent licensing dispute with Nokia.
The announcement, along with several others, also indicates a continuation of Qualcomm’s aggressive pursuit of the European market.
The Motorola agreement "is clearly something that is advantageous to Qualcomm in its battle with Nokia," said Ben Wood, an analyst with Collins Consulting in the United Kingdom.
Qualcomm and Nokia are embroiled in a bitter licensing renegotiation process as their current patent licensing agreement nears expiration in April. Nokia says that Qualcomm is charging more than is fair and reasonable for the patents that Qualcomm contributes to UMTS. Qualcomm may be hoping that the Motorola deal will help it prove that its terms are reasonable, because the number-two handset maker in the world agreed to them, Wood said.
The Motorola agreement also gives Qualcomm an important win in Europe, a market where it has traditionally been largely shut out. Because Nokia and Motorola are the two largest handset sellers in Europe, Texas Instruments and Freescale Semiconductor, their main chip suppliers, have supplied the vast majority of chips in Europe, Wood said.
The deal with Motorola could help Qualcomm sell other products in Europe as well because the chips support other Qualcomm technologies. "There are some logical synergies between the growing proportion of 3G handsets powered by Qualcomm and the potential for operators to deploy Brew because it’s built into the chipsets," Wood said. Brew is a mobile application development platform built by Qualcomm.
Qualcomm on Monday announced that Telecom Italia’s mobile arm, TIM, is the first operator to commercially launch services using Brew in Europe. TIM customers can choose from two handsets, one from Samsung Electronics and one from Onda, that support the service, which enables mobile games and a customizable user interface. The availability of Motorola handsets that include Qualcomm’s chips and thus support Brew could help TIM sell the service and also encourage other European operators to use Brew.
Brew competes with Nokia’s S60 mobile phone software and Java as a development platform for mobile applications.
Qualcomm made another announcement on Monday, coinciding with a visit to Europe by Qualcomm’s chief executive officer to meet with analysts, which indicates its commitment to the European market.
Qualcomm introduced a new single chip product for Global System for Mobile Communications (GSM). One of the new chips includes wideband code division multiple access (WCDMA), GSM, General Packet Radio Service and Enhanced Data Rates for GSM Evolution). The other includes all of those technologies plus high-speed downlink packet access (HSDPA). Qualcomm says they are the first chips to include an integrated radio transceiver, baseband modem and multimedia processor along with power management function into a single chip for WCDMA and HSDPA phones.
Qualcomm has made other headway into Europe recently. Earlier this year, British Sky Broadcasting began a trial of Qualcomm’s mobile TV system, MediaFLO. MediaFLO competes with other standard mobile TV technologies, such as DVB-H. Qualcomm had scheduled a press event for Tuesday with MediaFLO group to discuss the trial’s results, but the event was abruptly canceled. A spokesman for Qualcomm’s media relations firm said BSkyB had decided to postpone the announcement probably for another month or so.
-Nancy Gohring, IDG News Service (Dublin Bureau)
Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.
UPDATE 1-Motorola to put Qualcomm chips in high-speed phones
Mon Nov 13, 2006 10:57am ET
http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-11-13T155723Z_01_N13127...
Chips Drive Cost Differentials between CDMA and GSM Handsets, finds Study
http://www.sda-asia.com/sda/news/psecom,id,12099,srn,4,nodeid,4,_language,Singapore.html
Qualcomm has recently borne the brunt of considerable openly hostile pressure from carriers—most notably from Reliance in India—to reduce its royalty fees. Carriers point out that higher royalties for CDMA chipsets mean they cannot meet the same price points as their GSM competitors, and the need to subsidise handset prices is seriously impacting their margins. However, a new study by ABI Research indicates that royalties are not at the root of the cost differential between CDMA and GSM handsets.
Principal analyst Stuart Carlaw says, "The issue of royalties is just a convenient lever that carriers are using to put competitive pressure on the CDMA silicon market." ABI Research found that royalty costs for CDMA shipments into India were in the region of five percent of the total handset sale value. This is in line with Qualcomm's policy of normalising royalty fees at the five percent mark on a global scale. The sole exception is the Chinese internal market where a two-three percent royalty fee is applied.
Carlaw goes on to add that, "Comparing low cost CDMA2000 and 2G GSM devices is a bit like comparing apples to pears. The question is whether there is a direct need for this degree of functionality at the silicon level in emerging markets, especially given the comparably higher IC costs."
QUALCOMM Inc. Is Heading Higher On Motorola Deal
Monday, November 13, 2006; Posted: 09:22 AM
http://www.tradingmarkets.com/.site/news/STOCK%20ALERT/490673/
Motorola to use Qualcomm chips for UMTS handsets
Mon Nov 13, 2006 8:50am ET
http://today.reuters.com/news/articleinvesting.aspx?view=CN&storyID=2006-11-13T135001Z_01_N13470....
Motorola Gets $1.6 Bln Phone Order From China Telling (Update2)
By Dune Lawrence and Janet Ong
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=MOT:US&sid=aXgixfHvi....
Nov. 13 (Bloomberg) -- Motorola Inc., the world's second- largest maker of cellular phones, said it received a $1.6 billion order to supply phone handsets to Shenzhen Telling Telecom Development Co., a distributor of phones based in southern China.
The contract for 12 million handsets in 2007 was signed today in Beijing, Yan Siqing, chief executive officer for Shenzhen Telling, told reporters today. Michael Tatelman, Motorola's North Asia general manager, confirmed the details.
Schaumburg, Illinois-based Motorola is aiming to win market share in China from Nokia Oyj in the world's largest cell-phone market. China has 443.2 million cellular phone users at the end of September, with an estimated 30 percent of the population owning handsets.
Shenzhen-based Telling Communications distributes handsets made by Motorola, Nokia, Samsung Electronics Co. and Sony Ericsson Mobile Communications Ltd.
Motorola is among a group of U.S. companies that's accompanying U.S. Commerce Secretary Carlos Gutierrez on his trade mission to China.
China's trade surplus surged to a record $23.8 billion in October as imports grew at the slowest pace in 15 months. The gap widened from September's $15.3 billion, the customs bureau said Nov. 8. Exports jumped 29.6 percent and imports rose 14.7 percent.
Record Deficit
``Our exports to China are up 34 percent in 2006 on a year to date basis,'' Gutierrez said at a signing ceremony in Beijing today. ``We now export about $50 billion of services and merchandise to China. The future should be focused on exporting to China.''
The U.S. trade deficit has reached a record each of the past five years and is on track to exceed last year's $726 billion by 8 percent. The monthly trade deficit was $64.3 billion in September, led by a monthly record trade deficit with China, the U.S. Commerce Department said last week.
The new Democratic majorities in the U.S. Congress are likely to increase pressure on President George W. Bush over the trade deficit with China. More than two dozen measures aimed at the record U.S. deficit and what lawmakers call China's unfair undervaluation of its currency were blocked by Republican leaders over the past two years. With Democrats controlling the House and Senate next year following the mid-term elections, they will be in better position to push these measures forward.
``We all have to be very aware of any steps that we take that would signal protectionism,'' Gutierrez said today. ``The initial signals and comments that we've heard from Congress have been very positive in terms of supporting trade and trade agreements.''
China's exports are expected to rise to $960 billion this year, the official Xinhua News Agency reported Nov. 10, citing commerce ministry official Liu Haiquan, boosting the country's trade surplus to $150 billion.
To contact the reporter on this story: Dune Lawrence in Beijing at dlawrence6@bloomberg.net
Last Updated: November 13, 2006 03:15 EST
QUALCOMM Announces Agreement With Telecom Italia for
Groundbreaking BREW Solution Launch in Europe
- TIM to Offer 3D Games via BREW Gaming Signature Solution; Dynamic User Interface and Downloadable 'Themes' via uiOne Offering -
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=QCOM:US&sid=a7q1y83c....
SAN DIEGO and LONDON, Nov. 13 /PRNewswire-FirstCall/ -- QUALCOMM Incorporated (Nasdaq: QCOM), a leading developer and innovator of advanced wireless technologies and data solutions, and Telecom Italia, through its mobile unit TIM, the largest wireless operator in Italy, today announced an agreement to launch wireless data services based on QUALCOMM's BREW(R) solution. TIM plans to reinforce its leadership position in service innovation on 3G and HSDPA networks by making a variety of new applications and services available to its subscribers, including premium 3D mobile game titles by Gameloft through the BREW Gaming Signature Solution. With the uiOne(TM) offering, TIM users can also gain access to 'Idle Mode,' a dynamic TIM idle screen with the ability to subscribe to live content feeds, as well as downloadable 'Themes,' a series of skins that allow subscribers to customize the complete look and feel of their phone's user interface. Following launch of the new services, both the 3D mobile games and themes can be purchased and downloaded over the air using QUALCOMM's BREW solution.
"TIM's decision to launch BREW services in Italy underscores the momentum we are seeing for the BREW solution with European operators," said Peggy Johnson, president of QUALCOMM Internet Services and MediaFLO Technologies. "We believe there will be an accelerated drive toward native games in Europe in 2007, and TIM is poised to lead that charge by launching the proven, high-quality experience that the BREW Gaming Signature Solution provides. The uiOne offering allows TIM to greatly enhance the user's ability to discover key services, and its 'Themes' offering will deliver device customization that will allow TIM to differentiate its services."
"We believe adopting the BREW solution will allow TIM to greatly improve usability and introduce innovative premium data services across multiple handsets," said Massimo Castelli, chief marketing officer, Telecom Italia. "The BREW Gaming Signature Solution, with high-caliber 3D games from world-class publishers like Gameloft, and TIM's downloadable themes will deliver a unique user experience that will greatly improve our subscribers' enjoyment of our mobile services."
The BREW solution will initially support TIM services on two handsets based on QUALCOMM's MSM(TM) chipsets that will support robust 3D graphics and audio/video capabilities. The Samsung Z630 will offer TIM subscribers access to high-quality 3D wireless games. The Onda N5050 will offer the same services plus the 'Idle Mode' user interface and a range of custom TIM downloadable 'Themes.'
The BREW solution drives the discovery and delivery of innovative data services. It includes several offerings such as: uiOne for rich, integrated and dynamic user experiences with fast access to high-revenue services on wireless devices, and deliveryOne(TM) for differentiated and tightly integrated, operator-managed support and delivery of advanced wireless data content and services.
QUALCOMM Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on CDMA and other advanced technologies. Headquartered in San Diego, Calif., QUALCOMM is included in the S&P 500 Index and is a 2006 FORTUNE 500(R) company traded on The Nasdaq Stock Market(R) under the ticker symbol QCOM.
QUALCOMM and BREW are registered trademarks of QUALCOMM Incorporated. MSM, uiOne and deliveryOne are trademarks of QUALCOMM Incorporated. All other trademarks are the property of their respective owners.
QUALCOMM Contacts:
Bella Alabanza, QUALCOMM Internet Services
Phone: 1-858-658-4860
Email: qis-pr@qualcomm.com
Kristin Atkins, Corporate Communications
Phone: 1-858-845-5959
Email: corpcomm@qualcomm.com
Bill Davidson, Investor Relations
Phone: 1-858-658-4813
Email: ir@qualcomm.com
SOURCE QUALCOMM Incorporated
CONTACT: Bella Alabanza, QUALCOMM Internet Services, +1-858-658-4860, qis- pr@qualcomm.com , or Kristin Atkins, Corporate Communications, +1-858-845-5959, corpcomm@qualcomm.com , or Garrett Ponder, Investor Relations, +1-858-658-4813, ir@qualcomm.com , all for QUALCOMM Incorporated -0- Nov/13/2006 7:30 GMT
Last Updated: November 13, 2006 02:30 EST
Analyst: Qualcomm Will Make Up With Nokia
Posted date: 11/9/2006
http://www.sdbj.com/industry_article.asp?aID=1918457.5087702.1390701.6237561.8085225.102&aID2=10....
Qualcomm Inc. and Nokia Corp.’s licensing squabbles will be resolved, although not necessarily amicably. That’s according to Los Angeles-based analyst John Bucher with BMO Capital Markets.
In an analysis of Qualcomm’s performance and future expectations dated Nov. 3, Bucher said that while “posturing and drama” surround the pending expiration of licensing agreements between the companies, a positive resolution is expected.
“I’m not saying they’re going to reach an agreement by April,” said Bucher, referring to the April 9 expiration date of the companies’ licensing agreements. “In the end, though, I don’t believe that Qualcomm will lose any licensing revenue from Nokia.”
According to the report, in 1992 and 2001, Nokia entered into agreements for the use of Qualcomm’s proprietary Code Division Multiple Access and Wideband Code Division Multiple Access technologies.
In a Qualcomm earnings release dated Nov. 2, a footnote included on 2007 pro-forma earnings estimates stated that earnings per diluted share could be affected by 4 to 6 cents, if Nokia doesn’t renew the agreements to continue using Qualcomm’s intellectual property.
The report, co-written by Bucher and BMO analyst Jung Pak, states, “Qualcomm is not optimistic that an extension or new agreement will be entered into with Nokia prior to April 2007.”
The result of failed negotiations would be that Nokia could not lawfully use Qualcomm’s intellectual property pertaining to Code Division Multiple Access, or CDMA, technology — the dominant standard for cellular telephony in the United States. Similarly, Qualcomm will lose rights to sell integrated circuits that use Nokia’s patents.
Despite Qualcomm’s dour outlook of meeting an April deadline, the report foresees a resolution occurring within 12 months.
Citing Qualcomm’s strong position in cellular, mobile CDMA wireless communications, Bucher and Pak expect that, once settled, Nokia’s royalty payments will be at or near Qualcomm’s current rate, but will be offset slightly by an increase in fees Qualcomm pays for use of Nokia’s intellectual property.
“Nokia might not like the rate they have to pay, but 135 companies have licensing agreements with Qualcomm,” said Bucher. “They’ve agreed on the royalty rate after numerous independent negotiations.
“The problem Nokia faces is trying to convince somebody why it’s an unfair rate when all these other parties have agreed to it.”
Bucher disclosed that he and his family have a beneficial ownership in a trust that holds shares of Qualcomm as well as Flarion Technologies, a company Qualcomm bought in January.
— Andy Killion
Nokia Sounding Firm on Royalty Negotiations
http://www.cellular-news.com/story/19965.php
During last weeks conference call, Nokia was sounding a lot more aggressive in its stance over the ongoing royalty dispute with Qualcomm. Tal Liani from Merrill Lynch commented in a research note that Nokia has a much stronger intellectual property in WCDMA vs. CDMA and that therefore the royalty rate must be lower. Qualcomm will have to get the right to use Nokia's IPR in its semiconductors.
Nokia has not and will not give a free pass-through right to Qualcomm, meaning all of Qualcomm's semiconductor clients will have to pay Nokia royalties for using Nokia's patents. Merrill Lynch estimated that Nokia is ~7% of Qualcomm's revenues and ~10% of profits.
It is worth remembering that unlike most recent patent disputes between telcos, this dispute is not on the substance of the patents but rather the monetary arrangement between the two companies. Nokia acknowledges the existence of Qualcomm's GSM and WCDMA IPR but is looking to reduce the royalty rate.
Merrill Lynch does not expect any discount to Nokia to impact other royalty agreements though. The next two contracts between the two firms are only up for renewal in 2011 and 2013.
US Court of Appeals for the Federal Circuit 2006-1317
Click on link:
http://www.patentlyo.com/patent/2006/10/arbitration_inc.html
then click on Read the Opinion
you will see detail in PDF format.
Arbitration: Incorporation of AAA rules in license creates clear and unmistakable intent to arbitrate
Qualcomm v. Nokia (Fed. Cir. 2006).
Oct 23, 2006
http://www.patentlyo.com/patent/2006/10/arbitration_inc.html
A 2001 license agreement between Nokia and Qualcomm includes an arbitration clause. The agreement apparently does not cover all of Nokia’s products, and in 2005, and Qualcomm sued Nokia for patent infringement. The parties disputed whether the arbitration clause should apply here. Writing for a two-judge majority, Judge Prost explained that the parties “clearly and unmistakably” intended that the patent questions be arbitrated instead of a court as evidenced by the agreement’s incorporation of the AAA rules.
On remand, the district court will send the dispute to arbitration unless the arguments supporting arbitrability of the issues would be “wholly groundless.”
Notes:
Read the Opinion
One-line dissent by Newman
The 5 best stocks for 2007
Nervous? Big-cap growth stocks not only provide protection in these uncertain times, they actually get an extra performance kick from volatility.
http://articles.moneycentral.msn.com/Investing/JubaksJournal/The5BestStocksFor2007.aspx
Snip:
I have fine-tuned this list every year since then on the anniversary date of the beginning of the portfolio by throwing out five stocks that I think have fallen short of my original description and replacing them with five others. This year I'm throwing out Alcoa (AA, news, msgs), BP (BP, news, msgs), Charles Schwab (SCHW, news, msgs), Dell (DELL, news, msgs) and Unilever (UN, news, msgs). I'm replacing them with four graduates of my Future 50 portfolio: General Cable (BGC, news, msgs), Qualcomm (QCOM, news, msgs), Stryker (SYK, news, msgs) and Valero Energy (VLO, news, msgs) -- plus a somewhat newer company, Google (GOOG, news, msgs), that has demonstrated a sustainable competitive edge even during its relatively short existence.
See below for detail:
Latest Market Update
October 23, 2006 -- 10:00 ET [BRIEFING.COM] Major averages are now trading in split fashion, spearheaded by turnarounds in some key sectors. Technology has inched into the green following reports that IBM (IBM 91.54 +1.06) has filed patent infringement lawsuit against Amazon.com...
The problem is 2007. The solution -- for investors -- is a specific kind of blue-chip stock: large-market capitalization, predictably strong earnings growth, a reputation as a safe haven in a risky market, and strong exposure to long-term global growth trends.
In this column, I'll explain why and, as part of my annual update of my long-term "50 Best Stocks in the World" portfolio, give you five names from that list that fit the bill right now. I'll be adding two of them to my 12- to 18-month Jubak's Picks portfolio as well.
I laid out some of the reasons that 2007 is such a problem for investors in my Sept. 15 column, but conveniently the International Monetary Fund (IMF) provided a concise summary of the high degree of uncertainty surrounding next year's economic results in its semiannual outlook on the global economy, released on Sept. 13.
Here's the most likely scenario for 2007, according to the IMF. Thanks to strong growth from China (projected at 10% in 2007 after 10% growth in 2006) and India (7.3% in 2007 after 8.3% in 2006), the global economy is likely to grow 4.9% in 2007. That would be just a slight dip from the 5.1% projected growth in 2006 -- certainly good news for investors globally.
The developed economies don't fare quite as well, but growth there still isn't anything to worry about. Growth in the U.S. economy, the IMF projects, will slow to 2.9% in 2007 from 3.4% in 2006. Europe will slow more rapidly, to 2% in 2007 from 2.4% in 2006, as will Japan, to 2.1% in 2007 from 2.7% in 2006.
Still, growth under this most likely scenario isn't anything to worry about. It's certainly strong enough to keep corporate earnings perking along just fine.
The spoilers: houses and oil
But then the IMF had to go and spoil the party by listing all the things that could go wrong. The souring U.S. real estate market could go from bad to worse, taking U.S. economic growth with it.
How bad does the housing slump have to get before it sends economic growth into a tailspin? A 5% decline in national average prices could push economic growth down 0.3 percentage points in 2007, Merrill Lynch calculates. That would take U.S. growth down to 2.6% in 2007. (Average U.S. housing prices were still inching upward over the summer, although that trend looks likely to falter soon.)
You can see that kind of volatility boost performance in the results from my "50 Best Stocks in the World" portfolio over the past 12 months. My "50 Best Stocks in the World" portfolio gained 8.56% in the 12 months that ended on Sept. 14, 2006. That was slightly ahead of the 6.96% gain on the S&P 500 ($INX) for the period.
But both the more "conservative" S&P 500 and the 50 Best, with their heavy doses of large companies with long-term growth records, beat out the 3.6% gain on the more aggressive Nasdaq Composite Index ($COMPX) in what was a very volatile 12 months for stocks. Going for blue chips worked this year, I'd argue, because of market volatility that sent some investors in search of safety. It didn't hurt that after years of modest performance, many blue chips were relatively cheap at the end of 2005.
Not just any ol' blue chip will do
To the degree that 2007 is also shaping up as a volatile year, I think blue chips will again outperform many more aggressive indexes and sectors. And blue-chip growth stocks will offer even higher relative outperformance, I believe, if 2007 turns out to be worse than the IMF's most likely scenario. Gains from these stocks may not set your heart aflutter in that case, but they're likely to be much better than you'll get from more aggressive segments of the stock market.
But I don't think you want to own just any old blue chip in 2007, either. There is a significant chance that growth, especially global growth from China (as the country continues its runaway growth in the run-up to the Beijing Olympics in 2008) and India (as the country's rapid growth in its service and information technology sectors continues to spill over into manufacturing), will be at the high end of projections in the most likely scenario. In that case, I think investors want more exposure to global growth trends than provided by the average blue chip.
Where do you look for this above-average growth potential? Among blue chips with exposure to the long-term growth trends in the global economy. Trends such as the rapid expansion of the middle class in Asia's economies, or the aging of the global population, or the increasing integration of the global economy itself.
Let's take those rather vague themes and cast them into the form of specific stocks from the "50 Best Stocks in the World" portfolio that I started in September 1998. The goal at that point was to put together a list of 50 blue chips that earned that often-too-easily-bestowed moniker because they had truly outstanding opportunities for global growth ahead of them over the next five or 10 years. And, equally critical in the original selection process, because they had a competitive edge that would allow them to seize the lion's share of that global opportunity.
I have fine-tuned this list every year since then on the anniversary date of the beginning of the portfolio by throwing out five stocks that I think have fallen short of my original description and replacing them with five others. This year I'm throwing out Alcoa (AA, news, msgs), BP (BP, news, msgs), Charles Schwab (SCHW, news, msgs), Dell (DELL, news, msgs) and Unilever (UN, news, msgs). I'm replacing them with four graduates of my Future 50 portfolio: General Cable (BGC, news, msgs), Qualcomm (QCOM, news, msgs), Stryker (SYK, news, msgs) and Valero Energy (VLO, news, msgs) -- plus a somewhat newer company, Google (GOOG, news, msgs), that has demonstrated a sustainable competitive edge even during its relatively short existence.
The process seems to work. Over the past eight years, the "50 Best Stocks in the World" portfolio has gained 41.7% vs. a gain of 27.8% for the S&P 500 and 33.8% for the Nasdaq Composite.
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HTMLPlain TextYour e-mail address:Learn more about newslettersSo what five stocks would I pick from this list right now to own in the core of my portfolio for a very uncertain 2007?
Three that I already own in Jubak's Picks, my 12- to 18-month portfolio: American International Group (AIG, news, msgs) for its competitive edge in meeting the fast-growing demand for financial products, such as life insurance, among the middle classes of Asia; Amgen (AMGN, news, msgs) for its competitive edge in developing new drugs for an aging population that demands to live not just longer but also healthier lives; and PepsiCo (PEP, news, msgs) for its competitive edge in bringing the great American combination of salty snacks and flavored bubbling (or still) water to the rest of the globe.
To those three I'd add these two stocks: Johnson & Johnson (JNJ, news, msgs) for its unique mix of consumer, pharmaceutical and medical devices and the company's ability to innovate in all these segments; and Procter Gamble (PG, news, msgs) for successfully making the very tough transition to a truly global consumer-products company. I will be adding these two stocks to Jubak's Picks with this column.
In my next column, as promised, I'll show you how you can complement this relatively conservative core by being a little more aggressive in the energy and metals sectors while still limiting your risk.
Updates
Buy Procter & Gamble
There are lots of good short-term reasons to own Proctor & Gamble (PG, news, msgs). The toughest stage of the integration of Gillette, an October 2005 acquisition, are behind the company. Raw materials prices are falling, or at least not climbing as fast as they did a year ago (although it's a tribute to management that in this environment the company was still able to expand operating margins by 0.9 percentage points), and the likelihood of market volatility in 2007 should give a boost to safe haven blue chips like this one. But it's one long-term trend that really attracts me to the shares: Procter & Gamble has finally become a truly global company that will be able to grow sales at double-digit rates for years because it can tap into the phenomenal growth of the middle class in the developing economies of Asia. In fiscal 2006, Procter & Gamble received 26% of its sales from developing markets, up from 23% in fiscal 2005. That's the first time in its history that the company received more than a quarter of sales from developing markets. Sales in developing markets grew by 35% year-over-year, thanks in good part, it's true, to the Gillette acquisition. But organic growth in these markets was well into the double digits. Over the past five years, Procter & Gamble has increased developing market sales at a compounded annual rate of 16%. Oh, and did I mention that the shares are cheap? Standard & Poor's calculates that the company trades at just a forward PEG ratio (projected price/earnings divided by projected growth rate) of just 1.3 versus a PEG of 1.7 for its peers in the consumer products sector. The shares also pay a 2% dividend. As of Sept. 19, I'm adding Procter & Gamble to Jubak's Picks with a June 2007 target price of $69 a share.
Buy Johnson & Johnson
Johnson & Johnson (JNJ, news, msgs) looks like its worked its way through the problems that drove shares down as low as $56 a share in February 2006. In the drug unit, which accounts for about 45% of sales, the company's pipeline of new products should start contributing to revenues in 2007, diminishing the effect of older products coming off patent. In the medical device business, which accounts for 38% of sales, the company expects to be able to generate 5% to 6% revenue growth, a come down from the heady 10% growth in the early part of the decade, but the segment's contribution to earnings growth will be healthier than the top line number indicates, thanks to operating markets that climbed to 28.4% in 2005 from 24.2% in 2004. The acquisition of Pfizer's (PFE, news, msgs) consumer healthcare business (which will add brands such as Listerine, Lubriderm, Benadryl, Sudafed, Nicorette and Visine) will add about $4 billion in revenues to Johnson & Johnson's consumer segment (now 18% of sales). For the long haul, I like the company's continued commitment to research and development, which accounted for 13% of revenue in 2005, and its record of successful product innovation. As of Sept. 19, I'm adding Johnson & Johnson to Jubak's Picks with a September 2007 target price of $74 a share.
New developments on past columns
The state of coal stocks is strong: Well, the state of coal stocks isn't strong now, but that was the headline on my Feb. 3 column in which I added Headwaters (HW, news, msgs) to Jubak's picks. Not much has gone right for Headwaters since then: Three of the company's 43 customers for its synthetic fuel from coal technology shut down production as federal synfuel credits evaporated with higher oil prices. But the tide may have turned (or at least there is a bit of good news interrupting the steady drone of bad news) with lower oil prices. On Sept. 13, the company announced that one of its former customers, Teco Energy (TE, news, msgs), would restart its synfuel operations. The catalyst is a drop in oil prices below the $69-a-barrel price that triggers a phase out of government credits. Teco Energy is one of Headwaters bigger customers and its return to the market could signal a pickup in the synfuels business if oil, as projected, stays below $69 a barrel for the rest of 2006 and into 2007. Too soon to get too enthusiastic, but as of Sept. 19 I'm raising my target price for Headwaters to $36 a share by July 2007 from the previous $35 by October 2006.
Metals boom has room to run: How low will gold go? Seems like everybody and their Aunt Tillie has an opinion. One of the most reasoned that I've seen comes from GFMS, a London-based precious metals consultant. In its outlook for 2006, released on Sept. 14, the company said that the 20% drop in the price of gold since May had been fed by fears of central bank selling. Under the Central Bank Gold Agreement, central banks had set a quota for annual sales of up to 500 tonnes by Sept. 26, the end of the agreement's fiscal year. Banks had, however, sold just 337 tonnes by August, noted GFMS. That left banks 167 tonnes short of their selling limit and triggered fears that the banks would rush to meet the ceiling in the remaining month. The end of September will bring an end to those fears and let supply and demand set gold prices again. Which would be good news for holders of gold. Mine production will be flat with 2005 levels this year and continue to lag behind demand. Selling of existing gold jewelry for scrap filled the gold demand gap as high gold prices fueled selling in countries such as India. Lower gold prices usually reduce scrap gold sales and gradually drive the price of gold back up. GFMS is calling for $700-an-ounce gold by the end of 2006.
Meet Jim Jubak at the Money Show
Columnist Jim Jubak will appear along with many other top investment professionals at The Money Show in San Francisco, October 16-18. Jim will hold seminars entitled "Making money from the commodities super-cycle" and "Dog stars: 10 hated stocks to buy in December," and he will speak on a panel entitled "Smooth sailing in a bumpy market."
Editor's Note: A new Jubak's Journal is posted every Tuesday and Friday. Please note that Jubak's Picks recommendations are for a 12- to 18-month time horizon. For suggestions to help navigate the treacherous interest-rate environment, see Jim's new portfolio, Dividend stocks for income investors. For picks with a truly long-term perspective, see Jubak's 50 best stocks in the world or Future Fantastic 50 Portfolio.
E-mail Jim Jubak at jjmail@microsoft.com.
At the time of publication, Jim Jubak owned or controlled shares of the following equities mentioned in this column: American International Group, General Cable and PepsiCo. He does not own short positions in any stock mentioned in this column.
Report: Cell Phone Shipments Could Hit 1B This Year
By Mark Jewell
AP
10/20/06 8:39 AM PT
Cell phone shipments worldwide could exceed 1 billion this year, according to IDC. Because of strong third-quarter numbers, IDC is keeping intact its previous 2006 forecast of 998 million cell phone shipments this year, compared with 833 million a year ago. However, if the market is only slightly healthier than anticipated, the 1 billion-per-year threshold would be surpassed for the first time.
http://www.technewsworld.com/rsstory/53794.html
Snip:
Heated Competition
Nokia (NYSE: NOK) posted a market share gain over its rivals in the third quarter and remained in the No. 1 slot, with a nearly 33 percent increase in cell phones shipped to give it a 35 percent share compared with 32 percent a year ago, IDC said.
Schaumburg, Ill.-based Motorola (NYSE: MOT) strengthened its No. 2 position, with a 39 percent shipment increase and a share of 21 percent, from 18 percent a year ago.
Rounding out the top five were South Korea's Samsung Electronics, with a 12 percent share, down from 13 percent a year ago; Sony Ericsson , with 7.8 percent, up from 6.6 percent; and LG Electronics, at 6.5 percent, down from 7.4 percent.
What's the best smartphone display for multimedia?
PC Magazine tests four high end devices.
posted 10:28am EST Fri Oct 20 2006 - submitted by palmsolo
BLURB
http://www.geek.com/news/geeknews/2006Oct/bpd20061020039582.htm
I've seen a ton of different mobile device displays with quality ranging from decent to fantastic. Smart Device Central, a PC Magazine site, posted a report on the image and video picture quality of four smartphones that we thought you may be interested in checking out.
The site looked at the Motorola Q, Nokia N80, Palm Treo 700p, and RIM BlackBerry 8700. Serious testing was conducted, and--in the end--the BlackBerry 8700 and Motorola Q received an A grade, the Nokia N80 a B+, and the Treo 700p last with a C.
I would love to have seen how my favorite Nokia E61 device would score, since the display is excellent. The site will next be conducting tests on the Sony PSP and Nintendo DS, so I'll keep on eye on the site for those, too, since I use my PSP all the time for watching movies on the airplane.
Nokia considers US injunction in Qualcomm case unlikely
20th October 2006
By Rik Turner
http://www.cbronline.com/article_news.asp?guid=2B5085CA-C845-4264-9EE1-9CE968562F84
Nokia Corp thinks it unlikely that a US court would issue an injunction against the sale of its handsets in that market if it fails to sign a new IPR licensing deal with Qualcomm Inc by the time its current one runs out on April 9, 2007.
The Espoo, Finland-based mobile phone and network equipment manufacturer also published its third-quarter figures, with 20% top-line going only some of the way to offset declining margins and lower average selling price on its handsets as it ramps up its business in low-end devices for the developing world.
However, the highlight of its conference call to discuss the results was the discussion about intellectual property rights, where it was concerned to exude confidence on the subject of its litigious relationship with Qualcomm.
CEO Oli-Pekka Kallasvuo and CFO Rick Simonson had already mentioned the IPR issue in their opening remarks, with Simonson commenting that "the quality of our patent portfolio stands up to those of Qualcomm and others." That was only the beginning, however, as Simonson was prepared to get quite a bit more specific. He said: "we don't believe a US court will issue an injunction when we're still negotiating." He also cited the US Supreme Court's unanimous ruling, in May, in eBay versus MercExchange patent case, whereby a plaintiff needs to pass a four-factor test in order to receive an injunction against an infringer: 1) it has suffered irreparable injury; 2) remedies available at law are inadequate to compensate for the said injury; 3)a remedy in equity is warranted in light of the balance of hardships between plaintiff and defendant; and 4)the public interest would not be disserved by a permanent injunction.
Simonson argued that, using this four-pronged test, the outcome favors Nokia. To add steel to his comments, however, he also noted that the process is not a unilateral one, and Nokia could also seek an injunction against Qualcomm, as it too has IPR going into the latter's products in the area of W-CDMA.
Simonson said that even though Nokia is and expects to remain a net payer of royalties on IPR for the foreseeable future, the balance is about to change between the Finnish group and its opposing litigant. This is thanks to its decision to exit the CDMA market, at least in terms of R&D and actual manufacturing of handsets based on what he called Qualcomm's "proprietary standard" at the end of the first quarter of next year.
Instead, he said Nokia will use "selected ODMs" to address that market, particularly in the US. Mary McDowell, head of Nokia Enterprise Solutions, recently reiterated to ComputerWire that the company intends to have a CDMA offering in its Eseries of business smart phones, which if nothing else will mark the entry of the Symbian OS into the CDMA world, unless Nokia is prepared to dump the OS in which it is the largest shareholder in favor of, say, Windows Mobile 5.0 for that market.
Once Nokia has ceased actually designing and making CDMA phones, the responsibility for paying royalties on that technology to Qualcomm will pass to its eventual ODM partner(s). That will leave Nokia to pay Qualcomm royalties only for the IPR it owns in GSM and W-CDMA, while Qualcomm will also have to pay Nokia for its IPR in those areas, which may actually work out with Qualcomm owing it more than it owes Qualcomm.
When asked what would happen in the event of there being no deal on April 9, Simonson said cash payments to Qualcomm would cease until a new deal was in place.
Snip From Morningstar
http://news.morningstar.com/article/article.asp?id=176189
Snip:
Q: How does a company like Qualcomm (QCOM
Sponsored by:
QCOM) get an "A" rating on stewardship when top leadership is passed within a family from one generation to the next? While there may be good experience gained by working in the family business, I always find it hard to believe that a company has put the very best person in charge when the board allows a family member to take over the reins. I certainly understand how and why it happens, but it seems to me that the overall stewardship should be questioned.
A: I agree with your assessment about dynastic management. Promotion by surname is not likely to produce the most capable leaders, especially when the apple falls far from the tree. However, after speaking with analyst John Slack, who covers Qualcomm for us, I think Qualcomm deserves an "A" Stewardship Grade (although it's a borderline "A"--the company scores 90 out of 100 on the scale for Morningstar's Stewardship Grade, which is the lowest possible "A"). Qualcomm's options issuance has been fairly small in recent years, and its financial performance disclosure is arguably some the best in the industry. In addition, the company eliminated its staggered board of directors earlier this year. Each director will now stand for election annually. That said, grading a company's stewardship is more an art than a science. If you think Qualcomm's management succession should disqualify it from receiving an "A," I would not argue with you.
5th Annual CDMA Operators’ Summit Concludes
Posted: 20-Oct-2006 [Source: Sprint]
http://www.mobiletechnews.com/info/2006/10/20/114856.html
[Sprint Nextel hosted the 5th annual CDMA Operators' Summit in Las Vegas bringing together over 70 wireless industry leaders from around the globe to discuss the roadmap for development and promotion of CDMA2000 technology.]
Las Vegas -- More than 70 wireless industry leaders involved in the development, implementation and operation of the CDMA2000 third generation (3G) wireless platform today concluded the fifth annual CDMA Operators' Summit (COS) where they discussed the technology's evolution path and developed strategies to meet the growing international demand for 3G services. The summit included the largest CDMA2000 operators from China, Japan, South Korea, North America, Latin America, New Zealand, Africa and India, as well as key industry partners, such as Motorola, Nokia, Nortel, and QUALCOMM.
CDMA2000 operators offer a broad range of wireless applications, including voice and data communications, multimedia messaging, entertainment and broadband Internet access. According to the CDMA Development Group (CDG), CDMA2000 controls 80 percent of the global market share for 3G subscribers, with 169 operators in 75 countries serving more than 275 million subscribers across all six continents. About 8.5 million new users subscribe to 3G services every month, and as a result CDMA2000 is expected to reach 500 million subscribers by the end of 2010. With 1,460 devices from more than 81 suppliers, CDMA2000 already offers a greater selection of competitively priced devices from more suppliers than any other technology available today.
Topics discussed at the meeting included the CDMA2000 technology evolution path, infrastructure and advocacy issues, international roaming and device standards, as well as growing the CDMA2000 community. In addition, the delegates shared best practices, highlighted respective successes, and pledged their continued support of CDMA2000.
"Innovation is the common bond that all CDMA2000 operators share," said Tim Donahue, executive chairman for Sprint Nextel and host of the CDMA Operators' Summit. "Sprint has been a leader in the CDMA community ??? we have the most international roaming agreements; our CDMA2000 1xEV-DO network covers more than 160 million people and is the largest mobile broadband network in the U.S. We are in the process of rolling out the first EV-DO Revision A network in the country and will leverage this technology to provide our customers with high performance push-to-talk, multi-user video conferencing, real-time gaming, and large file uploads."
"KDDI is very pleased with the fruitful results of the CDMA Operators Summit," said Dr. Yutaka Yasuda, vice president and general manager, Corporate Technology Sector, KDDI. "KDDI is going to launch our EV-DO Revision A network in December. With the advantage of CDMA technology, we surely believe KDDI can offer our customers innovative multimedia solutions at attractive price points."
"We take great pride in our CDMA network, and consider it one of our company's strongest assets. We'll continue to enhance and expand that network to meet the needs of our consumer and enterprise customers today, tomorrow and well into the future," said Ed Salas, vice president, network planning at Verizon Wireless. "Verizon Wireless was pleased to participate in the Summit and to share our ideas about the evolution and growth of CDMA technology."
"As the sole CDMA carrier in Mexico, with an EV-DO network in 22 cities as well as nationwide 1x 2000 coverage, we are now prepared to offer data roaming to CDMA users from around the globe, and especially the NAFTA region," said Gustavo Guzman Sepulveda, CEO of Iusacell and head of the Iusacell-Unefon integration team.
"Tata Teleservices is playing a leading role in the development of the telecom infrastructure in India by offering integrated telecommunication services and is all set to redefine the existing benchmarks of the mobile service category in India," said Mr. Greg Young, chief technology officer, Tata Teleservices. "India holds tremendous market potential for wireless services and CDMA2000 is growing rapidly in India. Tata Teleservices will continue to work with our CDMA industry peers to define requirements, drive industry harmonization and further continue the evolution of CDMA2000 to meet customer demands and enhance the performance and efficiencies of our network."
"China Unicom and SK Telecom have decided to implement a joint procurement of CDMA handsets," said Li Zhengmao, Vice President, China Unicom. "This will clearly motivate the industry to be more cost effective."
"Although CDMA2000 is the leading 3G technology in the world, in today's competitive market we must constantly strengthen its value proposition," remarked Perry LaForge, executive director of the CDG. "We have built new programs to strengthen the ecosystem and incorporated the very latest technologies into our roadmap to allow operators to further evolve the performance of their networks while retaining existing economies of scope and scale."
There are a lot of info on NOK/QCOM from
Nokia Q3 2006 Earnings Call Transcript
Posted on Oct 19th, 2006 with stocks: NOK
Nokia Corp. (NOK)
Q3 2006 Earnings Call
October 19, 2006 8:00 am ET
For detail, please see link below:
http://seekingalpha.com/article/18841
We might see QCOM over 40 today.
http://www.nasdaq.com/aspxcontent/ExtendedTradingTrades.aspx?mode=frameset&page=afterhours&F...
Pre-Market Trade Reporting Monday October 16
Pre-Market
Last: $ 40.12 Pre-Market
High: $ 40.12
Pre-Market
Volume: 9,863 Pre-Market
Low: $ 39.85
Pre-Market
Time (ET) Pre-Market
Price Pre-Market
Share Volume
08:34 $ 40.12 100
08:30 $ 40.10 100
08:30 $ 40.10 300
08:26 $ 40.09 200
08:25 $ 40.05 363
08:25 $ 40.09 1,000
08:25 $ 40.09 100
08:24 $ 40.05 200
08:24 $ 40.05 263
08:22 $ 40.05 100
08:20 $ 40.04 300
08:20 $ 40.04 120
08:17 $ 40.03 1,300
08:17 $ 40.03 1,300
08:17 $ 40.05 500
08:12 $ 39.99 100
08:12 $ 39.98 300
08:12 $ 40 200
08:12 $ 40 167
08:12 $ 40.02 150
08:10 $ 40 400
08:10 $ 40 400
08:08 $ 39.96 100
08:06 $ 39.90 100
08:06 $ 39.90 300
08:01 $ 39.89 250
08:01 $ 39.89 650
08:00 $ 39.85 100
08:00 $ 39.85 100
08:00 $ 39.88 300
1
Option Achieves Industry's First HSUPA Calls Using Next Generation Wireless Data Card
http://www.bbwexchange.com/pubs/2006/10/15/page1423-239829.asp
10/15/06 - Option (Euronext: OPTI, OTC: OPNVY) announced that they have successfully completed one of the industry's first demonstrations of live HSUPA (High Speed Uplink Packet Access) data card calls reaching a wireless uplink transmission rate of 1.3 Mbps and a wireless downlink of 2.7 Mbps at application level. The test calls were carried out at Nortel's(*) (NYSE: NT; TSX: NT) research campus in Chateaufort, France. Commercial availability of "HSUPA-Ready" and full HSUPA products from Option are planned for the first half of 2007.
HSUPA, the next step after HSDPA, enhances the data speed in the uplink up to a theoretical maximum of 5.7 Mbps, from the 384 kbps currently available with HSDPA. Higher performance is achieved through more efficient uplink scheduling in the base station and faster retransmission control. Whereas HSDPA (High-Speed Downlink Packet Access) enables users to receive large data files across the "downlink", HSUPA increases the speed at which users can send large data files across the "uplink". Traditional business applications along with many consumer applications will greatly benefit from these enhanced uplink speeds.
A laptop fitted with an Option HSUPA data card (category 3 in uplink, cat 6 in downlink) based on QUALCOMM (NASDAQ: QCOM) Mobile Station Modem (TM) (MSM(TM)) MSM7200(TM) chipset and commercial HSDPA/HSUPA network equipment from Nortel were used to achieve the new record data speeds. The companies completed an initial series of tests showcasing the HSUPA advantages for a large number of applications such as: uploading a 15 MB file onto a server, sending and receiving e-mails with large attachments, demonstrating the simultaneous HSD (High Speed Downlink) and HSUPA capabilities and video conference over IP. In addition, the HSUPA and HSDPA calls were also conducted in a car while driving at 50 km/h. The tests clearly demonstrate the capacity of mobile wireless broadband for high quality Mobile-TV, High Definition Video on demand, MP3 downloads, person-to-person data applications and real-time person-to-person gaming.
Jan Callewaert, CEO of Option: "Another world first for Option, this successful HSUPA test confirms our product roadmap is on schedule and underscores our commitment to bringing the most advanced wireless broadband solutions to market. The strong relationships that we enjoy with leading chipset suppliers and infrastructure providers - QUALCOMM and Nortel, - are important elements in our continuing technological and product leadership."
"This demonstration is an important milestone in making true wireless broadband a reality," said Dr. Sanjay K. Jha, president of QUALCOMM CDMA Technologies. "QUALCOMM is pleased to be working with Option to drive HSDPA and HSUPA deployment for wireless users around the world."
Option announced its first HSDPA demonstrations at CeBIT 2005 and CTIA Wireless 2005 tradeshows. In September 2005 the company announced its worldwide unique "HSDPA-Ready" concept. In December 2005 Option was the first to demonstrate data cards working at 3.6 Mbps. Subsequently in January 2006 this year Cingular demonstrated Option's 3.6 HSDPA card live at the Las Vegas Consumer Electronics show. In June 2006 the company announced its "7.2 Ready" product, the GlobeTrotter GT MAX, as a continuation of its HSDPA strategy. With today's announcement of the world's first HSUPA data call the company is further building on its leadership in cellular technologies.
By Robert Hoskins
Why Does WiMAX Matter?
By Rhonda Wickham
October 13, 2006
Wireless Week
http://www.wirelessweek.com/article/CA6380800.html
The wireless infrastructure market represents about a $40 billion market. Wireless as a whole is a market at least times times that value. By contrast, WiMAX is expected to represent perhaps 1 percent of that. So why does WiMAX matter? According to Rupert Baines, vice president of marketing for picoChip, there are five reasons WiMAX is important.
1. It is the first global standard. Looking around WiMAX World, it is obvious it is very international with companies offering products from around the world. It is totally different than GSM or CDMA evolution, which pitted different parts of the world against each other.
2. WiMAX changes the traditional telecom or wireless business model. WiMAX drives the pace of change with open interfaces and re-use of standards.
3. WiMAX is the road to 4G. Baines said 4G is going to be OFDM, MIMO and all-IP. WiMAX is the first standard to deliver all of those. It is the breakthrough that all of those other markets and technologies could not do.
4. WiMAX treats voice as just another packet stream with flat-rate pricing.
5. The elephant in the room is the intellectual property. Who owns the patents? Who owns OFDM? According to Baines, there are roughly 1,400 patents on OFDM. He said Samsung owns about one-third of them while Qualcomm comes in second.
On the down side, Baines said he thinks there are close to 30 companies making chipsets for WiMAX. If you recognize that companies need to make between $20 to $50 million in order to pay for the development of the technology, he said it is obvious there is a bloodbath coming.
In the end, Baines said it takes a long time to get technology right. In fact, he said it always takes 5 years to reach adequate volume. “Even with Sprint’s vision, volume is not real until 2009,” he said.
Thanks Biz, please see Important Bloomberg Up date. I would trust Bloomberg more than other bias news.
Important Bloomberg Update:
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=QCOM:US&sid=aDnQQQiv....
Broadcom Fails to Win Ban on Qualcomm-Based Phones (Update1)
By Susan Decker and Peter J. Brennan
Oct. 10 (Bloomberg) -- Broadcom Corp., a maker of chips for consumer devices, failed to convince a judge to recommend a ban on U.S. imports of mobile phones that use Qualcomm Inc.'s newest chips.
International Trade Commission Judge Charles Bullock said in a decision released today that Qualcomm chips infringe one Broadcom patent, and that phones using the chips also infringe the patent. The judge said two other patents weren't infringed.
Still, the judge said he ``does not recommend'' that any order banning Qualcomm chips in the U.S. cover cell-phones made by other companies that use the chips.
To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net ; Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net .
Last Updated: October 10, 2006 11:03 EDT
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=QCOM:US&sid=a7qHlNJA...
Broadcom Gets Partial Win in Bid for U.S. Ban on Qualcomm Chips
By Susan Decker and Peter J. Brennan
Oct. 10 (Bloomberg) -- Broadcom Corp., a maker of chips for consumer devices, won a judge's ruling in its campaign for a ban on U.S. imports of Qualcomm Inc.'s newest cell-phone chipsets.
International Trade Commission Judge Charles Bullock said in a decision released today that Qualcomm chips infringe one Broadcom patent, and that phones using the chips also infringe the patent. The judge said two other patents weren't infringed.
To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net ; Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net .
Last Updated: October 10, 2006 10:53 EDT
Biz, I got the info from SI thread only:
http://www.siliconinvestor.com/readmsg.aspx?msgid=22894663
because no ban recommended!
Broadcom, Qualcomm Move Ahead of Meeting
Monday October 2, 2:42 pm ET
Broadcom, Qualcomm Shares Move Ahead of Legal Wrangling
http://biz.yahoo.com/ap/061002/qualcomm_broadcom_mover.html?.v=1
Snip:
"We don't think an injunction is going to happen," said American Technology Research analyst Shaw Wu. "We think a settlement is more probable."
NEW YORK (AP) -- Shares of wireless technology developer Qualcomm Inc. and communications chip maker Broadcom Inc. were among the most actively traded in the technology sector on Monday, possibly in anticipation of legal developments scheduled to occur later this week and next week.
The chairmen of the two companies, Irwin Mark Jacobs and Henry Samueli, have been ordered to meet in a San Diego federal court on Wednesday to discuss a global resolution of the roughly 10 lawsuits the companies have lodged against each other.
Then, on Oct. 10, the International Trade Commission is expected to deliver a final initial determination on a case in which Broadcom is seeking a ban on handsets that include Broadcom technology.
While few analysts expect any dramatic rulings in the immediate future -- the ITC ruling will be reviewed by six commissioners who will then make a determination on Feb. 9, and the San Diego meeting isn't expected to produce a settlement -- shares of both stocks moved in heavy trading.
Broadcom shares, which have traded between $21.98 and $50 over the last year, were up 58 cents, or 2 percent, at $30.89 in afternoon trading on the Nasdaq after earlier spiking as high as 31.73.
Qualcomm shares sank $1.83, or 5 percent, to $34.52 on the Nasdaq, edging toward their year-low of $32.76, hit in August. Shares traded as high as $53.01 in May.
"We don't think an injunction is going to happen," said American Technology Research analyst Shaw Wu. "We think a settlement is more probable."
Below is a more objective view regarding BRCM vs.QCOM, IMHO.
U.S. Agency May Decide Chip Battle
From Bloomberg News
October 2, 2006
http://www.latimes.com/business/la-fi-chip2oct02,1,6381091.story?coll=la-headlines-business
The global patent battle between two Southern California chip makers for supremacy in a fast-growing segment of the wireless-telephone industry could be decided in an obscure corner of the Washington bureaucracy.
Broadcom Corp. of Irvine is asking an International Trade Commission official to decide next week to bar the importing of handsets that use technology from San Diego-based Qualcomm Inc.
Broadcom says the Qualcomm technology, which provides high-speed Internet access and enables users to view high-quality videos, violates patents on its chips.
The outcome of the fight may determine control of the U.S. market for so-called 3G, or third-generation, wireless handsets, a market that exceeded $1 billion last year.
The stakes are so high for both companies that some experts say they would be foolish not to reach a settlement, rather than risk an adverse decision.
"I can guarantee you that their customers are calling them every day and pushing them to settle," said Lyle Vander Schaaf, a patent lawyer with Bryan Cave in Washington who isn't involved in the dispute. Vander Schaaf is a former lawyer with the trade commission.
Charles Bullock, an administrative law judge at the International Trade Commission, is due to decide Oct. 10 whether the government should bar the Qualcomm-powered phones.
Bullock's decision will be reviewed by the six-member commission.
After that, it may be challenged in a federal appeals court in Washington.
Qualcomm Lawyer Says Offer to Broadcom Is Unchanged (Update1)
By Peter J. Brennan
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=QCOM:US&sid=a1NkgvQj....
Sept. 28 (Bloomberg) -- Qualcomm Inc., the world's second largest maker of cellular phone chips, is offering rival Broadcom Corp. the same licensing deal the company put forward when the two began negotiating last year, its lawyer said.
Qualcomm Chief Executive Officer Paul Jacobs said in an interview yesterday that his company is offering Broadcom an ``extremely favorable'' deal. That applies to the offer Qualcomm had made in initial negotiations, Bill Sailer, legal counsel for the San Diego-based company, said in an interview.
Broadcom, which makes chips for cable-television boxes, and Qualcomm have 10 patent lawsuits between them. A U.S. judge ordered them to take their dispute to a mediator Oct. 4. Broadcom has said Qualcomm's refusal to negotiate better license terms is blocking it from selling the latest cell-phone chips, which can browse the Web. Qualcomm accused Broadcom of theft.
Jacobs' remarks yesterday suggest an agreement between the two companies ``is likely'' on Oct. 4, JPMorgan analyst Ehud Gelblum wrote in a note to investors today. A deal favorable to Broadcom implies Qualcomm's ``legal armor could be pierced,'' he said.
Qualcomm shares dropped $1.11, or 2.9 percent, to $37.02 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Shares of Irvine, California-based Broadcom rose $1.09, or 3.7 percent, to $30.84.
To contact the reporters on this story: Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net .
Broadcom Before the Storm
By Nicole Ridgway Published: September 28, 2006
http://www.smartmoney.com/Techsmart/index.cfm?story=20060928
ONCE THE POSTER CHILD of the tech boom, Broadcom (BRCM: 30.66, +0.91, +3.1%) now finds itself emblematic of a much less heralded sign of the times. The chip maker is one of more than 100 companies embroiled in the stock options backdating fiasco, but it holds the singular distinction of racking up the largest amount of charges so far — more than $1.5 billion worth — as a result of its options-granting practices.
Like a true bubble-era wonder, Broadcom, which had yet to turn a profit when it went public in 1998, used options to lure new talent and retain its highly coveted execs. Now, with the company expected to pull in $3.7 billion in sales this year, the options craze has come back to haunt it. Broadcom's auditors discovered that a significant chunk of the options it granted employees between June 1998 and May 2003 was backdated.
Backdating occurs when the date an option was granted is changed to reflect a date when the stock was trading at a much lower price. So when an employee cashes in those options at the lower exercise price, they make a larger profit. In congressional testimony earlier this month, Lynn Turner, the managing director at investment research firm Glass Lewis & Co., likened the practice to betting on a race after the race is over.
Since Broadcom launched an internal review of its options practices in mid-May, its share have plunged 20% to around $30. (The 52-week high was $50). Investors have reason to be concerned about the Irvine, Calif., company, but I can't help wonder whether the selloff is too reactionary. Those option-related charges, while admittedly humongous, will be recorded as noncash, stock-based compensation charges that will be reflected in restated earnings statements that go back to 1998. The charges should be offset by the company's paid-in capital accounts. If you don't have an accounting degree, don't fret. The bottom line is the charges aren't expected to impact the company's cash position or shareholders' equity, begging the question of whether investors should run for the hills or take advantage of Broadcom's beaten-down shares.
For short-term investors, the what-ifs facing this company, including higher tax expenses and possible shareholder lawsuits, far outweigh the potential near-term payoff. Long-term investors, however, might find a golden opportunity to tap into some high-growth markets. Broadcom's market-leading integrated circuits are used in a whole slew of broadband and wireless communications products, as well as enterprise networking gear. According to Stifel Nicolaus analyst Cody Acree, Broadcom has outpaced its industry peers for at least four quarters now. "They will continue to outgrow the industry as they continue to gain net share," he says.
But investors will have to be patient. Pacific Crest Securities analyst Ruben Roy, whose firm makes a market in Broadcom's shares, predicts that the stock will be stuck in a tight trading range of $26 to $32 until 2007 when, hopefully, the stock options dust has settled.
Those willing to wait it out should keep in mind that this backdating business is complicated, right down to a debate on the legality of the whole thing. Some claim there was no law governing the practice at the time, therefore offenders shouldn't be criminally prosecuted. Others disagree. "It is patently against the law," declares H. Nejat Seyhun, a finance professor at the University of Michigan's Ross School of Business. "If someone tampers with corporate documents in order to increase their compensation, then that comes under corporate fraud laws."
Executives at Comverse Technology (CMVT: 21.30, -0.37, -1.7%) and Brocade Communication Systems (BRCD: 7.05, -0.05, -0.7%) are currently under criminal investigation by U.S. authorities for just that. The Securities and Exchange Commission is probing more than 100 companies and the Internal Revenue Service is also digging in its heels. The U.S. Attorney's Office in central California contacted Broadcom, asking it to voluntarily provide certain documents, but no criminal investigation is underway.
Road to Recovery
Broadcom Chief Financial Officer William Ruehle, who had been with the company since 1997, unexpectedly retired last week as a result of the company's options review. A highly regarded exec, Ruehle had signed off on the SEC documents during the time in question and some, like Jefferies analyst Adam Benjamin, believe his departure might help speed the review along. "We believe the certainty and potentially quicker timing of a resolution outweigh the change in management, and we would take advantage of any weakness," he wrote in a Sept. 20 research report.
Timing is a big issue. Broadcom has left us in the dark about when the review will be completed. Earlier this month, investors were shocked to hear that charges were expected to be more than twice as much as the $750 million the company had anticipated two months earlier and could climb significantly higher. Broadcom also said it would have to restate earnings from 1998 through the first quarter of 2006 (originally it was only going to be 2000-2003). As a result of the review, the company has delayed the filing of its earnings statements, and Nasdaq is threatening to delist its shares.
I find it highly doubtful it'll come to that, though. Broadcom spokesman William Blanning says the company has filed for an extension with Nasdaq and expects a decision within the next few weeks. "We hope to refile our restated financials and get back to compliance as quickly as possible," he wrote in an email.
There are other risks to keep in mind as the options saga unfolds. Broadcom could be facing a hefty tax bill. Companies used to be able to write off options that were granted as incentive income for execs. Should the options in question be deemed unworthy of those benefits, the company could owe Uncle Sam some serious back-taxes. It could also face shareholder lawsuits. Both lawyers and accountants will cost the company plenty of money.
There's also the psychological impact of an options-backdating investigation. University of Michigan's Seyhun and his colleagues conducted a study examining 88 companies and found that once a company discloses an options review its shares lose an average of 7.5% in value, lobbing off $415 million in market cap. Broadcom's stock has taken much more than a 7.5% hit, and that's exactly why I think it would do long-term investors well to invest in the stock once much of the results of the options review are revealed, which I believe will be in the next month or so.
In late July, the company said sales during the current third quarter would fall short of expectations due to slower-than-expected demand for digital subscriber line and Ethernet switching products. That inventory buildup might cause another hit to the stock, but it's widely expected to be resolved by the fourth quarter.
"Per our industry checks, our sense is that Broadcom's own visibility has improved going into 4Q," wrote BMO Capital Markets analyst Ambrish Srivastava in a research note Monday. Srivastava said sales should pick up on the release of Nintendo's Wii, the addition of new PC customers like Hewlett-Packard (HPQ: 35.73, +0.34, +1.0%) and Apple Computer (AAPL: 76.77, +0.36, +0.5%), increased wireless handset shipments and a faster-than-expected recovery in the DSL market. The analyst, who has an Outperform rating on the stock, ratcheted his 2006 earnings estimates up to $1.32 from $1.29 a share compared to last year's 98 cents.
"Longer term, we think Broadcom is one of the top three semiconductor companies," says Pacific Crest's Roy, who rates the company's shares Sector Perform. He thinks the company's set-top box, wireless local area network and Bluetooth businesses will be highfliers going forward.
Maybe in a few months Broadcom can concentrate on what it really should be known for: that "top three" semiconductor company status. Until that time, it's going to have to try its best to put this options debacle behind it.
Trai suggestions favour CDMA, alleges COAI
BS Reporter / New Delhi September 29, 2006
http://www.business-standard.com/economy/storypage.php?leftnm=3&subLeft=1&chklogin=N&aut....
The Cellular Operators’ Association of India (COAI) — the body representing GSM operators — has attacked the recommendations of the Telecom Regulatory Authority of India (Trai) which, it says favour CDMA operators.
The body said the pro-rating of 800 Mhz exclusively given to CDMA operators was grossly unfair. It also sought participation in the auction of 450 Mhz, another band exclusively allotted to CDMA operators.
The telecom regulator had submitted its recommendations to the department of telecommunications (DoT) yesterday.
“The pro-rating of the second highest winning bid in 2.1 GHz auction as the price of 800 MHz band (given to CDMA operators for their 3G EV-DO services) is grossly unfair and incorrect,” COAI said.
It argued: “It should be noted that 800 MHz spectrum is far more valuable than 2.1 GHz because of its far higher propagation characteristics. In fact, logically speaking, they should be asked to give a pro-rata premium over the highest winning bid in 2.1 GHz band and also a higher reserve price.”
On 450 Mhz band being exclusively for CDMA operators, T V Ramachandran, director general of COAI, said : “It is discriminatory.”
3G handset prices poised to crash
Surajeet Das Gupta / New Delhi September 29, 2006
http://www.business-standard.com/common/storypage.php?leftnm=lmnu9&subLeft=2&autono=260094&a....
For customers who want to savour high speed data on their 3G mobile handsets, the cheapest available model is Rs 11,500. But operators say prices are expected to fall to as low as Rs 4,500 within the next two years.
Most operators admit they need to subsidise the handset price in the beginning to build volumes. So expect a basic 3G service with a bill of Rs 1,000 every month, with some free data downloads thrown in.
“Existing average revenues per user are Rs 250-300. We expect basic entry-level 3G to cost at least double, if not more,” said Cellular Operators’ Association of India Secretary-General TV Ramachandran.
3G services are expected to roll out from mid-2007, provided the government clears the Telecom Regulatory Authority of India’s recommendations on spectrum auction.
And according to the Yankee Group, operators might have to invest an incremental $866 million in capital expenditure in the next few years to make themselves 3G ready.
So what is so great about 3G (whether it is the EVDO — evolution of video and data only — phones in CDMA or the WCDMA phones in GSM)? For one, it gives amazing Internet download speeds, at least 10 times faster (2.1-3.1 mbps per second) than what EDGE phones offer, or as much as 20 times the speed of the popular GPRS connection.
And in case you are using the latest GSM 3G technology, at 14 mbps per second, it is 50 times faster than an EDGE phone. Simply put, you can download a film clip or a whole song in a few seconds and play online real-time games with players across the globe.
There are already many 3G enabled mobile phones in the market, which can be used once the services are available. Tata Teleservices, for instance, has launched an EVDO-enabled Motorola Razr phone for Rs 14,000.
In the GSM space you can already pick up phones like the Nokia 6680 (Rs 15,000) Nokia 6280 (Rs 16,800), Sony Ericsson P990i (Rs 38,000), Nokia N93 (Rs 40,000) or the imate Jas (Rs 28,000).
Already, 5 per cent of the phones in the country were 3G enabled, said Indian Cellular Association President Pankaj Mahendru.
Operators say it will take them 6-8 months after they get the spectrum to roll out 3G services, so expect services to roll out in June 2007. But how big is the market? Opinions here clearly differ.
The Yankee report looks very optimistic and predicts that there will be 21 million 3G customers by 2010, which is 11 per cent of the total mobile customer base of the country (estimated at $201 million).
But Ramachandran said: “Earlier, we had expected 10 per cent of the subscriber base to go 3G. With the huge reserve price, we think it will not be more than 5 per cent.”
Operators have to invest money to upgrade their existing networks and the price will depend on which band they get spectrum.
Said a senior executive of a leading CDMA operator: “If we get spectrum in the 800 MHz band, where we already operate CDMA services, the incremental cost of investment would be 15 per cent. But if we get the 450 or 2,100 MHz band, it will mean virtually creating a new network, except maybe the cost of base station infrastructure.”
Even for GSM operators, investment for setting up a 3G network is more or less equivalent to the cost they incurred in a 2G network except that they can use the same infrastructure, like the base stations.
Vodafone launches Vodafone-branded 3G handset
28/09/2006 by Carla Moore
http://www.dmeurope.com/default.asp?ArticleID=18611
Vodafone has introduced its Vodafone-only branded 3G consumer handset, the Vodafone 710, marking the operator's first step into the consumer handset market.
The Vodafone 710 incorporates a number of Vodafone services including Vodafone Radio DJ, mobile TV, music downloads, video telephony and Vodafone Live. The handset also features an MP3 music player, a 1.3 megapixel camera and Bluetooth.
The handset is manufactured by Huawei and features a chipset by Qualcomm. As part of Vodafone's intention to introduce further Vodafone-branded handsets, the company has relocated part of its terminals division from Japan to Hong Kong to spearhead the sourcing of new devices and to negotiate contracts with Asian manufacturers.
The Vodafone 710 will be launched in the UK, Germany, Spain, Italy, Ireland, Greece, Netherlands, Romania and Portugal from early October 2006.
Update1:Qualcomm Chief Offers Broadcom a `Favorable' Deal
By Molly Peterson and Peter J. Brennan
http://www.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=QCOM:US&sid=aM3LTzoC....
Sept. 27 (Bloomberg) -- Qualcomm Inc., the world's second largest maker of cellular phone chips, is offering Broadcom Corp. an ``extremely favorable'' deal to make semiconductors for the newest handsets and settle outstanding legal disputes.
``We're willing to have, I think, a settlement that's extremely favorable to them and I'm hopeful that we'll get to that point,'' Chief Executive Officer Paul Jacobs said after a speech in Washington today. ``We've been making very earnest offers to them.''
A U.S. judge has ordered Qualcomm Chairman Irwin Jacobs and Broadcom Chairman Henry Samueli to take their differences to a mediator in San Diego on Oct. 4 as a way to resolve legal issues between the companies. Broadcom says Qualcomm is blocking it from the market for chips used in newest handsets that can browse the Internet. Qualcomm has accused Broadcom of theft.
``We felt like the conversations that have been happening previously between the chairmen were productive and then maybe when it got down in the ranks, things sort of got off-track,'' said Paul Jacobs, who is Irwin's son.
Shares of San Diego based Qualcomm fell 57 cents to $37.86 at 2:29 p.m. New York time in Nasdaq Stock Market composite trading. Shares of Irvine, California-based Broadcom climbed 46 cents to $30.32.
Broadcom spokesman Bill Blanning wasn't immediately available to comment. Texas Instruments Inc. in Dallas is the world's biggest maker of chips for cellular phones.
Patent System Works
The patent system works ``pretty well'' and the government should be ``extremely careful'' about changing it, Jacobs said during a company-sponsored event that attracted about 100 people, including congressional aides, Federal Communications Commission staff, lobbyists and journalists.
Qualcomm's profit from royalties tripled in 2005 to $1.66 billion from five years ago. This has caused resentment from some companies that must pay Qualcomm to use technology in the newest handsets, also known as third-generation, or 3-G, wireless phones. Licensees have asked the U.S., South Korea and the European Commission to conduct antitrust or patent investigations into Qualcomm's handling of use rights.
Broadcom wants the U.S. International Trade Commission to stop imports of handsets with Qualcomm's newest chipsets. Administrative Law Judge Charles Bullock is scheduled to rule on the issue Oct. 10.
Qualcomm on Oct. 2 will ask another U.S. judge in San Diego for a preliminary injunction against Broadcom, alleging theft of intellectual property. Broadcom has denied that claim.
Broadcom on Aug. 31 lost an antitrust case it brought against Qualcomm in New Jersey when a federal judge there found insufficient evidence of monopolistic behavior by Qualcomm.
Broadcom's loss ``raised the bar very high for them'' to continue legal actions, Jacobs said. ``It just shows the point that they are sort of casting around for almost anything they can do.''
To contact the reporters on this story: Molly Peterson in Washington at mpeterson@bloomberg.net ; Peter J. Brennan in Los Angeles at pbrennan3@bloomberg.net .
Last Updated: September 27, 2006 14:40 EDT