Article Excerpt:
TWST: Let's start with an overview of what you are covering in the telecommunications equipment space.Mr. Bollin: I currently cover Motorola (MOT), Nokia (NOK), Research In Motion (RIMM), Palm, Incorporated (PALM), and Multi-Fineline Electronix (MFLX). Big picture, looking at the handset market, which is really the majority of my coverage right now, what I can tell you is there are several macro themes that are driving better handset adoption. You are seeing an accelerated replacement rate by existing users, you are seeing emerging market growth of what a lot of people are coming to call the BRIC regions (Brazil, Russia, India, and China) and you are seeing a technology migration where the old and existing 2G and 2.5G infrastructure of the carriers is being upgraded to what's being called 3G services, basically faster capabilities, faster bandwidth, more service offerings to customers.
TWST: What's driving this faster replacement cycle?
Mr. Bollin: I think the biggest factor in the replacement cycle has been
the increased adoption of services and increased adoption of additional
offerings over the handset, and what I mean by that is more individuals
are using their handset to listen to music, to view video clips, to text
message, to e-mail. There are more feature sets and capabilities that
are being embedded in a handset, which in a sense is causing users to
use or purchase a new device that has greater and more advanced
capabilities. Then, on top of that, I would say the carriers themselves
are subsidizing handsets to the tune of much lower prices on sell-
through to the consumer and the reason they are subsidizing the devices
more than they have in the past is they are simply seeing higher average
revenue per user. So, if you can lock a user into a two-year contract
and ensure that you are getting an additional $20 or $30 a month from
that user for a data service, over the course of that two years, that
could easily translate to a $400 or $500 boost in the revenue per user,
which makes a $100 to $200 subsidy on that handset make sense.
Tickers included in this excerpt: ALA, HK, J, MFLX, MOT, NA, NOK, PALM, RIMM, SI, SK
TWST Newsletter
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.