Qualcomm and Nortel Get Boost from Verizon's $1 Billion Investment

Strategic Insights -

Verizon Wireless' plan to invest $1 billion in a new high-speed internet network that uses Qualcomm's CDMA technology is a significant boost to the technology company, as well as Nortel Networks, which announced a $100 million order for internet telephony equipment from Verizon the day before. This increased spending is part of a broader rally in telecoms equipment stocks since the start of the year, with equipment makers such as Qualcomm and Nortel poised to benefit from stronger demand in the communications industry. Despite the signs of recovery, the equipment makers are still overshadowed by the catastrophic collapse in spending that began in 2000.

Key Takeaways:

  • Qualcomm's CDMA technology has been selected by Verizon Wireless for a new high-speed internet network, with an investment of $1 billion.
  • Nortel Networks has received a $100 million order for internet telephony equipment from Verizon, the day before the announcement of the Verizon Wireless investment.
  • The signs of increased spending have contributed to a powerful rally in telecoms equipment stocks since the start of the year, with Qualcomm's shares rising over 5% and Nortel's shares gaining 8% early yesterday.
  • The rally has not been universal, with overall capital spending in the telecoms industry expected to recover only slightly at best this year, rising by 2% according to Merrill Lynch.
  • Companies that specialize in faster-growing parts of the communications industry, such as data networking and wireless, are expected to see stronger demand, with Nortel likely to benefit from its leading position in voice-over-IP and wireless technology.
  • Qualcomm's decision to push a data-only version of its wireless technology, known as 1x-EVDO, has been vindicated by the Verizon Wireless decision, as other third-generation systems are based on a combination of voice and data.
  • Lucent and Alcatel have also seen significant gains, rising 37% and 21% respectively since the start of the year, while Ericsson is up 15%.
  • The new data-only network from Verizon Wireless promises average data speeds of 300-500 kilobits per second, compared to speeds of 100-130 kbps promised by AT&T Wireless.

Statistics:

  • Verizon Wireless' $1 billion investment in a new high-speed internet network that uses Qualcomm's CDMA technology.
  • Nortel Networks' $100 million order for internet telephony equipment from Verizon.
  • Rally in telecoms equipment stocks since the start of the year, with Qualcomm's shares rising over 5% and Nortel's shares gaining 8% early yesterday.
  • Overall capital spending in the telecoms industry expected to recover only slightly at best this year, rising by 2% according to Merrill Lynch.
  • 300-500 kilobits per second: average data speeds promised by Verizon Wireless' new data-only network.
  • 100-130 kbps: average data speeds promised by AT&T Wireless.

Sources:

  • Merrill Lynch
  • Qualcomm
  • Nortel Networks
  • Verizon Wireless
  • AT&T Wireless