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WCDMA wins boosts Qualcomm earnings

Hang on, aren't they supposed to despise the Euro-commie 3G protocol?

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Those of us you who like to view the Qualcomm story as a parable of American isolationism and bull-headed stupidity - and that's a narrative Qualcomm executives and their creepy, militia fringe supporters (including Qualcomm sock-puppet Stewart Alsop) have done little to discourage in recent years - have one slight problem to contend with.

It isn't entirely true.

Although the bare-knuckle San Diego pugilist makes a virtue of being unpopular, it's actually a hell of a more pragmatic company than its shrill marketing would have you believe. For a few years it's been determined to portray its own version of CDMA, CDMA-2000 as the version that the rest of world will eventually adopt, as opposed to the technically inferior but more widely supported WCDMA standard, it's quietly and carefully positioned itself to win whichever standard becomes ascendant. Which is a very smart move.

The headline earnings saw sales of Qualcomms chipsets rocket: QCOM earned $1.1 billion, up 27 per cent from the previous quarter. This was due to the recent range of 2.5G phones despite having a slightly lower average selling price (this is how Qualcomm determines these royalties) than their predecessors. QCOM says it will ship between 105 and 112 million in the next year, a drop in the ocean compared to the vast quantities of handsets shipped using the global standard GSM standard. (Nokia and Motorola each estimate the global market to be in the region of 400-400m units) So you can see how economies of scale desperately handicap Qualcomm.

But although it talks tough, it's actually been stealth-selling systems based on the WCDMA alternative that it so vehemently disparages. The WCDMA licensees must actually pay a royalty to Qualcomm, so in a way it can't really lose.

"Twenty-seven subscriber licensees reported sales of [Qualcomm's own] CDMA2000 1X products and seven subscriber licensees reported sales of [the unspeakable alternative] WCDMA products.

"Twelve infrastructure licensees reported sales of CDMA2000 products and seven infrastructure licensees reported sales of WCDMA products"

So as you can see, WCDMA is increasingly important to Qualcomm's business.

Some years ago, Qualcomm mulled, but rejected an ARM-like licensing model in which it would position itself as the CDMA expert to all the world's 3G carriers, and open the chipset business to encourage multiple suppliers. That was rejected and it chose instead to market its own partisan flavor of CDMA as the sole supplier (of this CDMA2000 standard), and pour a relentless marketing barrage of horseshit on the WCDMA alternative. Unfortunately that left Qualcomm as the only supplier of its own CDMA flavor of chipsets. As a result the Qualcomm-CDMA industry moves at a glacial pace, and no market endures a single-supplier monopolist for very long.

Several anguished QCOM shareholders are quite aware of this and have been muttering to us about "class action" for some time, reasonably reckoning that Qualcomm could take a much smaller share of a much bigger market, rather than a vast share of a tiny market, and be rather better off.

We surmise that Qualcomm has wisely recognized this, and is bending quite pragmatically to satisfy all comers. Which is good news: the company pioneered CDMA and deserves to reap the reward. The only trouble is the anti-WCDMA marketing now looks distinctly hypocritical. And the company has to lure those militia rednecks who have formed the mainstay of its propaganda efforts in recent years down from their caves. ®

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