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Thursday, October 19, 2006

High on Standards (QCOM)

By Willam Trent, CFA of Stock Market Beat

After last week’s big WiMax confab there was plenty of talk about how industry leaders would deal with Qualcomm (QCOM) and what types of patents were necessary for what types of products and services. The Yankee Group thinks they ought to get on with it, according to Tekrati Research News:

Yankee Group predicts that standardized mobile WiMAX will not become a reality until early 2008. The analysts find that hype around WiMAX technology creates uncertainties and increased frustration among potential adopters. “While the WiMAX standards process has led to much frustration in the industry, the standard is essential to the market success for the technology,” said Tara Howard, a Yankee Group analyst who tracks broadband access technologies.

Howard said standards are critical for ensuring vendor interoperability and certifying devices. It is also important to educate service providers and potential customers on the actual timeline for standardized products to help avoid a burnout.

Are standards critical? Perhaps. But that doesn’t necessarily mean standards established by a bureaucratic industry group filled with companies with competing objectives and varying degrees of leverage over the process, as Qualcomm well knows. The GSM standard adopted throughout the world was simply not as effective as Qualcomm’s CDMA technology and in a mirror image of the BetaMax story the best technology won. While GSM proponents say their technology is still the dominant one it is only because they have re-branded CDMA as UMTS for their own upgrade path. Sorry, but if Qualcomm gets a royalty on it we’re calling it their standard.

So, will the WiMax standard be set by the industry huddling together and hashing things out or by somebody that comes along with a whiz-bang product we didn’t realize we absolutely had to have?

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

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