As Qualcomm ( QCOM) vows to repel the hordes encroaching on its wireless turf, investors have started noticing some weak spots on the battlements.

Led by Nokia ( NOK), rivals are preparing to storm the ramparts of Qualcomm's fast-growing code division multiple access, or CDMA, wireless standard. Qualcomm insists it will fight for every inch of its lucrative near-monopoly territory, but observers agree that the company can't expect to maintain its stranglehold -- Qualcomm sells close to 90% of all the world's CDMA chips -- forever.

The worries have been brewing for some time, but they came to a head at a recent analyst day. Normally these sessions are placid affairs, with issues raised in earnest and put to rest with ease. But that wasn't the case last Thursday, when Wall Street's tech crowd outlined a growing list of concerns topped by pricing trends on Qualcomm's CDMA chips and phones.

Focusing the spotlight on a sweating Qualcomm is a pending agreement that would allow Nokia, the world's No. 1 handset maker, to supply phones to Verizon Wireless, the nation's No. 1 CDMA telco. Qualcomm's CFO, Bill Keitel, says the alignment of those two powers is supremely good news for the CDMA industry. He points out that Qualcomm gets a royalty for every CDMA phone sold, and adds that an expanding sales base will boost Qualcomm's already strong numbers.

But industry watchers warn that the competitive onslaught could slash Qualcomm's robust profit margins even if sales do rise, putting pressure on a stock that has mostly been running in place for the past year. On Friday, Qualcomm fell 45 cents to $30.90.

Hammerlock

Pricing isn't the only issue facing Qualcomm. Some analysts, namely SG Cowen's Christin Armacost, who downgraded the stock Friday, have been focusing on concerns ranging from inventory gluts to other competitive challenges. But the main issue, as always, is whether the company can maintain its virtual monopoly on the world's fastest-growing wireless technology.

The event that probably contributed most to the latest round of concerns is the formidable alliance of Nokia, Texas Instruments ( TXN) and STMicroelectronics ( STM). The handset king has joined with the two chipmakers to develop a code division multiple access, or CDMA, chip to rival if not surpass Qualcomm.

To be sure, this would mark the third time Nokia has made bold claims on Qualcomm's turf. But people familiar with the latest effort say the third time may prove to be the charm. Sanford Bernstein's crack research team, led by Paul Sagawa, opened up the latest generation of Nokia, Samsung and Motorola CDMA phones, only to find that Nokia's silicon circuit board -- called a baseband -- was roughly 10% smaller than the rest.

Size obviously means a lot in this industry, and if Nokia's chips get a passing grade on Verizon's ( VZ) rigorous technological test, it's fair to say that quality is assured. Given that head start, there's no reason to believe the Nokia group can't muscle into Qualcomm's turf in coming months.

When words like fight are thrown around, talk of price pressure usually breaks out. Keitel admits that CDMA chip prices will come down, adding that that's not a bad thing for volume. "We don't price to slow the market," he says.

What Keitel is less eager to point out is that while Qualcomm pockets an estimated $6 to $9 of every CDMA phone purchase, it is entitled to almost none of the revenue from the chips used in Nokia phones. Keitel declined to comment on the terms of Nokia's licensing agreement, but experts expect Qualcomm to receive few if any royalty payments from Nokia.

Obviously, that hurts. Chip sales account for 63% of Qualcomm's revenue and about half its profits. Some analysts say that if it were to take 10% of the CDMA chip market over the next year, Nokia could slash Qualcomm's chip profits by 20%.

Loss Leader?

Qualcomm's Keitel offers a different analysis. Keitel points to similar challenges in recent years from equally capable rivals like Motorola ( MOT) and Ericsson, and in each case Qualcomm has come out a winner. Mastering CDMA tech is hard in itself, but challengers also have to nail things like support, testing and software to provide "the full solution," says Keitel.

Keitel says he's familiar with Nokia's numbers and insists the CDMA project won't be profitable. "I can't pull together a picture that gives them a positive bottom line," he says. "And I don't know of anyone else who can either."

In any case, Keitel acknowledges that there are a number of capable players vying for the CDMA market. "We aren't planning for 100% market share and we know we aren't going to keep our same levels," he says, adding, "but we will fight aggressively for every point of share."

There is an element to that argument that some investors seem to agree with. If Nokia's phones are phenomenally popular, the sheer volume of handset sales -- and particularly Qualcomm's take -- will go a long ways toward offsetting the sliding Qualcomm chip revenue.

"It's not exactly devastating to their business model," says one New York money manager who has no Qualcomm position. "Sure, they are losing market share, but it's possible that the entire world will be using CDMA phones some day."

Until then, Wall Street will continue the age-old debate over Qualcomm's impressive strengths and alarming weaknesses.