Qualcomm Inc (QCOM)

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Qualcomm Provides an Analysts Market Update

http://www.cellular-news.com/story/17316.php

Qualcomm recently held an Analysts Day for investors. Merrill Lynch were there and report that the day, unsurprisingly was focused predominantly on growth expectations of the WCDMA market. Growth of 3G markets (both evolving from CDMA and GSM upgrades) was strong, with 77% YoY subscriber growth in the CDMA EVDO market and 139% YoY subscriber growth in WCDMA over the same time frame.

In the Japanese market, 53% of users are now on WCDMA, and the 3G subscriber base surpassed 2G subscribers for the first time in March 2006.

In contrast, 75% of handset shipments in the Dec-05 quarter in Europe were GSM vs. 25% for WCDMA. However, Merrill Lynch sees a clear migration to WCDMA with an 8% YoY decline in GSM handset shipments vs. a 144% increase in WCDMA handset shipments. This was fueled predominantly by declining handset selling prices, with 10% seq. decline in calendar 3Q05 and an additional 8% seq. decline in calendar 4Q05.

Another driver of the 3G rollout was the drive by carriers to increase their data ARPU. March quarter results show Verizon and Sprint (and others) growing their data ARPU on a YoY basis by 79% and 55% respectively through the customer migration to 3G services.

One interesting fact that emerged was the impact of handset subsidies on sales of high-end phones. It seemed that in South Korea, where handset subsidies have just been reintroduced, the average price paid did not fall - the customer simply spent the same amount as before, but purchased a higher spec model.

Qualcomm's CEO, Dr. Jacobs confirmed that the company will continue to focus on being a wireless/cellular technology enabler, in the current 2G and emerging 3G world, and in future 4G technology. The company will be driving the market towards technology neutral handsets, putting multiple antennas into handsets to support 3G and WiFi services. Doubtless, some operators may have differing opinions about that move however, seeing a potential WiFi attack on their 3G and VoIP revenues.

There was no significant detail into the ongoing royalties dispute with Nokia, it generally being accepted that all the hype is nothing more than negotiating tactics. Both parties have too much to lose from not settling the royalty payments by the April 2007 deadline.