February 17, 2007
Qualcom Deals: Present, Past, and Future
Qualcomm made the news twice in the last couple of weeks: 1) Cingular (AT&T Wireless) and Verizon have agreed to use Qualcomm’s MediaFlow technology to supply their mobile TV services. 2) Reports speculated it is close to resolving its patent conflict with Nokia, which has been operating under a joint licensing agreement but expires in April. Both Nokia and Qualcomm did not confirm the report.
Cingular will begin to offer its mobile TV service later this year and Verizon will rollout its service in the next three months. The result will be added revenue for Qualcomm. This is common knowledge, hence these deals have been priced into QCOM, but deals with the two largest wireless carriers in the states should supply revenue to drive a company for half a decade; the resulting price jump was only 4%. So where’s the uncertainty, why hasn’t the price made a full compensation for the announcements? Mobile TV needs higher speeds to operate due to the massive amounts of data the must be transmitted. Asia and Europe have wireless technologies implemented to a more advance degree than the states. In China and India the current rush is over 3.5G, in the US we are slowly getting to 3G. The lag in installing infrastructure to support wireless technology in the states has caused concern for delay in revenues and with delay comes the chance the newer, better, different companies’ technology might enter into the market. This is Wall Street, results happen now or tomorrow, not next week.
Here’s the upside, Qualcomm has a dominant position with the wireless carriers in the states, but wireless carriers only represent a portion of the future media flow. Broadcast companies, seeking a way to combat piracy, iTunes and all other new TV mediums are seeking a way to regain control over their content. Shows like House MD, Greys Anatomy, Survivor, the Office are popular and the networks need to adapt their supply routes to their consumers. MediaFlow can potentially fill the gap between today’s TV in kitchen and your mobile, not just for the wireless carriers, but also for the standard networks. Obviously the window becomes significantly easier to shoot through as VoiP phones become more prominent and wireless networks spring up in the major cities, thus bypassing the need for wireless carriers in the state-side metropolises. This is a play to consider as QCOM is currently 23% off it’s 52-week high of $53 in May.
Posted by jwbir at February 17, 2007 01:48 PM