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Thursday, August 24, 2006

Is WiMax Priced In? Qualcomm and Intel

Stocks: (QCOM)(INTC)(S)(Q)(VZ)(T)(AMD)

Qualcomm and Intel share one thing in common. Both trade near 52-week lows. Intel has a range of $27.49/$16.75 and trades at $18.36. Qualcomm's range is $53.01/$32.76 and it trades at $36.78.

With Sprint agreeing to use WiMax for its next generation handset and the radio spectrum auction driving up costs for the paid portion of the airwaves, WiMax may end up being attractive to a lot of companies. DirecTV and Echostar have already dropped out.

Qualcomm has a view of the wireless handset that is powered by the next generation of Qualcomm technology. It made its way to the top of the tech world by being the brains inside of hundreds of millions of cellular phones. That may be ending.

WiMax is a technology that may well allow a company like Sprint to set up a partnership with one of the satellite TV companies to bring the "triple play" of voice, tv, and broadband to the home. Another campany being painted into a corner is Qwest. It does not have the balance sheet to do the huge fiber-to-the-home installations that AT&T and Verizon are building to offer their version of the "triple play".

There is an argument that Intel's piece of the PC and server chip market could fall below its current 75% to 80%. Will AMD make more inroad? It will be hard if Intel uses it larger marketing and R&D capacities wisely. In addition, Intel has its WiMax play.

Qualcomm may be the man left in the hallway. There will continue to be a massive market for their products for the better part of the next decade, but whether WiMax will encroach on their sales has to give pause to investors. It may be the first critical challenge the company has faced.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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