QUALCOMM INC. PUBLICLY SAID that it was giving up on developing its Ultra Mobile Broadband evolution for CDMA, leaving the technology’s upgrade path up in the air.
During an analyst meeting last week, the company said it was ending research and development for UMB – also known as CDMA2000 1x EV-DO Revision C – to focus on the Long Term Evolution standard, which has received strong support from carriers and infrastructure vendors. Qualcomm had proffered Rev. C as the “4G” technology path for its EV-DO standard, but failed to garner support from operators, including those that had already deployed
Rev. A upgrades. Domestically, Verizon Wireless, AT&T Mobility, T-Mobile USA Inc. and a handful of smaller carriers have already said they will deploy networks based in the LTE standard, while others, most notably Sprint Nextel Corp. and Clearwire Corp., have thrown their support behind WiMAX.
Earlier this year CDMA supporters hinted that UMB might still find support in developing markets, but Qualcomm’s announcement seems to have shut the door on that option.
While the company has trimmed an unspecified number of positions, CEO Paul Jacobs said the company had no plans for major job cuts.
Focus on portable computing
Qualcomm also stuck by its guidance from early November that growth in CDMA-based handsets next year would be significantly lower than forecasts made before the financial services sector melted down in September.
The company sees itself well-positioned to take advantage of growth in W-CDMA-based handsets, including smartphones, and in “netbooks” powered by its Snapdragon chipsets.
Qualcomm executives also expressed optimism that the company’s recent settlement with Nokia Corp. could result in further business between the two companies. (Separately, Nokia on Friday reduced its outlook for the fourth quarter and for 2009, citing data on consumer spending from the last few weeks.)
“My big takeaway was that ‘netbooks’ are going to be big,” said analyst Mark McKechnie at American Technology Research. Netbooks are considered low-powered, laptop computers geared toward basic functions like Internet access and word processing. The devices usually sport screens of around 10 inches or smaller and sell for less than $500.
“While quite early, and despite the near-term macro(economic) issues, we came away from Qualcomm’s analyst day incrementally positive on its positioning in netbooks and smartphones, two of the fastest-growing areas in tech hardware,” McKechnie wrote in a note to investors on Friday.
McKechnie cited Qualcomm’s Snapdragon chipset’s low-power requirements as a competitive advantage as the netbook space heats up and the company’s Gobi HSPA modems for notebooks.
Jacobs told analysts he expected the company’s fortunes to rebound in the second half of next year as demand for handsets recovers and netbooks take off. Qualcomm announced 15 netbook design wins last week, including from major laptop vendors such as Acer, Asus, Quanta, Inventec, Compal, Foxconn, Toshiba and HTC Corp. The company forecast sales of netbooks to reach 95 million annually by 2012, according to McKechnie.
“We are encouraged by Qualcomm’s smartphone/netbook strategy, which we believe can ‘bridge the gap’ between cellphones and PCs,” McKechnie wrote. “Qualcomm is well-positioned to participate in one of the fastest growth areas of technology.”
The analyst said that Qualcomm’s stock value would grow, despite “interruption” by the global contraction in credit and resulting economic weakness.
Conversely, McKechnie said, “consumer end markets are clearly deteriorating with little visibility into a recovery,” which could make Qualcomm’s ostensibly conservative guidance for 2009 too optimistic.
