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http://boards.fool.com/Message.asp?mid=13327965&sort=postdate

<<I was with you (for the most part) until you got to the really meaty stuff at the end about not seeing the proprietary open architecture, the switching costs,
the tornado, etc., etc., and especially the need to see a "dominant market share of all competing architecture offerings." I do see everything except the last item. That last one is one that, for me, isn't necessary to label a gorilla. The fact that a disruptive innovation is new (that's why it's called an innovation) precludes its owner from having to dominate all the previous forms of competition that are being disrupted.>>

Mike- I do see some of the components/prerequisites of a "Gorilla" in QCOM- I just don't see all of them, which is why I can't bring myself to call it a "Gorilla".

At this point in time, as far as the ongoing 2G digital cellular tornado, I see the tornado (it may even be slowing), the control of a proprietary open architecture by QCOM in its 2G CDMA based offerings, high switching costs at the carrier level though not at the consumer level. The one I have a problem with is the one I described as "dominant market share of all competing architecture offerings", which I could have worded more simply as "QCOM won in the tornado and so emerged as the Gorilla". I didn't mean to suggest that QCOM needs to have a dominant market share of all the technology offerings taken as a whole, even including the ones that they are disrupting, just the relevant ones that they are competing against. But I think we probably disagree on what QCOM's 2G CDMA technology as a discontinuous innovation is disrupting. I would tend to think that it is disrupting landlines and pagers, and maybe even analog cellular access. (I don't know how inferior analog really is to digital, how much of a compelling cost advantage there would be to a carrier to rip-out and switch from 1G to a 2G network, or how much better service a customer could expect, and consequently switch cellular providers). I don't see 2G CDMA as currently disrupting 2G TDMA/GSM in the 2G digital voice only tornado. I tend to think of 2G CDMA, TDMA, and GSM as competing architectures in the 2G digital tornado. I tend to think of them as a DOS versus a Mac OS in the PC tornado. Maybe I'm wrong about this. But if I view 2G CDMA as competing in the same digital cellular tornado with 2G TDMA and GSM, then I think QCOM "lost" in this tornado, doesn't have a dominant market presence in digital handsets sold for example, and so is not the "Gorilla" crowned by this tornado. I don't think this tornado crowned any Gorilla. The handset and supporting infrastructure to me are an Enabling technology, not Application Software, and so a resulting "Gorilla" should have a dominant 60%, 70%+ market share, not the 25-30% share expected of Application Software Gorillas, and certainly not the present 10-15% of world wide handset sales that CDMA accounts for. By the fact that GSM ip is owned by several companies, isn't controlled by one company, and so it isn't singularly proprietary, there can be no competing GSM "Gorilla" even though GSM based handsets are the clear present market winner worldwide. The best I can come up with is that QCOM is a "Chimp" in a overall Gorillaless tornado, so that it is in a stable position as a Chimp eventhough it is in an Enabling technology. Or maybe it is sort of a local weak "Gorilla" imprisoned in the 2G CDMA "niche" market, with no hope of really moving its cage bars further out into the GSM territory. I don't really know what zoo creature metaphor to best describe it as. Maybe its strength is on par with that of an Application Software Chimp, in a tornado that happens to only produce nearly equal software "Chimps".

QCOM isn't about to be snuffed out, but it doesn't have anywhere close to the power it would have today, if it had emerged as an Enabling technology Gorilla from the 2G tornado, had fought and won, producing a world which was predominantly 2G CDMA, instead of 2G GSM. If QCOM were the true 2G enabling "Gorilla", it is unlikely that 3G W-CDMA would have been designed without their participation, and unlikely that it would achieve much market acceptance without their support. The world would wait and look to QCOM for the next CDMA upgrade, much like we look to Redmond for the next Windows release. If it were the true "Gorilla", I don't think it would be forced to undergo the Spinco contortions.

Since QCOM doesn't control the 3G W-CDMA standard, which seems likely to be the dominant standard worldwide for 3G, I have trouble seeing how they can successfully take another stab at things, in the 3G tornado to come, and emerge as a Gorilla out of that one either. Others have tried to distinguish between "standard" as in the "W-CDMA standard" and "architecture" as in " control of an open proprietary architecture", needed by a Gorilla, to suggest that eventhough QCOM doesn't control the W-CDMA standard, they may still have contol of an open proprietary architecture, and still may become the 3G "Gorilla", but I haven't been able to discern the subtle (I hope its subtle and not that I am dense) distinction they are making.

I also worry about their ability to control their value chain to their advantage, design out high margin partners, if they go the route of a pure ip company, with no in house manufacturing or marketing ability and relationships. I think it is difficult for a pure ip company to successfully tornado hop, or enter nearby lush markets, and the "surfing" of multiple tornados is the story behing the King-Kong successes at Microsoft, Cisco, and Intel. I also am disturbed by their complete lack of brand and disinterest in establishing one, as others have mentioned. Successfully communicating to consumers that QCOM developed CDMA and that CDMA "is better" (even if at the moment that isn't quite true) and that the consumer should seek out cellular providers that use CDMA, would give them alot of leverage with their value chain. All I've seen so far are some now and then poorly placed cell stickers (?"Digital by Qualcomm") I've recently seen a few Sprint ads that have a "Solutions by Nortel Networks" logo on them, and I can't think of a company that is further removed from individual consumers than Nortel, so this may look like a complete waste of money at first. I'm not advocating a monkey-see-monkey-do, mindlessly follow the herd, but I wonder whether Nortel (and Cisco with their ads about 99% of the world's internet traffic travelling over their systems) are on to something here, that notwithstanding Dr. J's vision thus far, QCOM seems to have missed out on. But then again, my only claim to fame over Dr. J. so far is that at least I've never lost / had my laptop stolen. But that's kind of easy, I've never been able to afford one.

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