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Wednesday, August 16, 2006

WiMax Nation: Qualcomm Tries To Escape The Whirlpool

Stocks: (QCOM)(NOK)(S)(INTC)(MOT)

Qualcomm investors got the shock of the year when Sprint Nextel announced that it would adopt WiMax for its next generation of phones. The win was big for WiMax champions Samsung, Intel and Motorola, but there was little Qualcomm could do to put a brave face on the defeat. The company issued a statement saying its patents were used in the new technology and that it would expect some royalties from the deployment. When pigs fly.

A couple of days later Nokia filed a complaint in Delaware federal court Nokia claims that Qualcomm has violated its agreement to license IP on a fair and reasonable basis. Lawsuits between big companies are rarely a good thing for either side but with Nokia’s share of the global cell market, the disagreement cannot be good news for Qualcomm shareholder.

Qualcomm may also be slowing down in its old age. Revenue for the quarter ending June 25 was $1.952 billion. In the immediately previous quarter it was $1.834 billion. A nice increase, but hardly a world beater.

After a run from $30 in early 2004 to $53 this April, the stock has fallen sharply to $35, which is getting close to the 52-week low. The stock run was not a surprise. Between fiscal 2003 (September 28) and fiscal 2004, revenue went from $3.97 billion to $4.88 billion. Operating income rose from $1.31 billion to $2.13 billion.

The growth is harder to come by these days.

Qualcomm will have to make peace with companies like Nokia and get a few big wins for the next generation cell system to put WiMax back in its place. If not, it is going to be a long year for Qualcomm holders.

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

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