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Wednesday, November 01, 2006

Can Mobile Video Sell Phones?

Stocks: (MOT)(QCOM)(TXN)(NOK)

Mobile video is being viewed as a big driver of cell phone service revenue and perhaps handset sales at well, especially in markets like Japan where many of the phones have the capacity to show video over 3G. In Japan, 85% of customers have internet data plans. In the US that number is 20%.

Informa, a research firm covering the wiresless market recently projected that cell phone sales will drop from a 20% plus rate this year to under 10% in 2007. While the growth has been impressive, especially among the big handset makers, their stocks have fallen on worries about demand and an increase in the sale of cheap, less profitable phones.

That makes two significant problems facing the industry. Slow growth and chaph phones have a ripple affect beyong Nokia, Motorola, Samsung and other handset companies. Chip firms like TI and IP providers like Qualcomm all could face a difficult 2007.

Video could be something of a salvation, and it could come on fast. Almost no one predicted the viral spread of video across the internet. Companies like YouTube did not even exist two or three years ago. Could content end up being a driver for handset sales? It is certainly possible.

The cell industry needs its own YouTube, or something like it, to shake off what could be a very, very rough year.

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

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