doujn:
With regard to QC's 3-5 yr growth rate, I refuse to hold myself out as being smarter than I am (like a few Wall Street analysts I know). There are so many variables to such an analysis that any aphorism I offered would be notable only for its inaccuracy. Nonetheless, I disagree with your presumption that $3.00+ represents a "high base" of earnings.
Based on a $250mm royalty estimate for FY99 (and a 40% tax rate), my $3.25 EPS estimate presumes that QC's manufacturing operation only earns $150mm (pretax). I say "only" because this implies a pretty skinny, sub 4%, operating margin (remember...I am only anticipating a breakeven performance from the company's infrastructure operation). Fiscal 2000 should benefit from continued growth in royalties, handsets, ASICs, Omnitracs PLUS the meaningful infrastructure profitability. So, while I think FY99 is the year the stock starts to perform, FY2000 should be the year that the business model really begins to click. This is really an issue of operating leverage. QC has a number of businesses generating lots of revenue but little, or negative, margin. If the revenue continues to climb, and margins turn positive and then expand, profitability jumps exponentially.
Although the probabilities have improved materially, much has to happen for this happy scenario to be realized. Please forgive me for being circumspect with estimates.
Best regards,
Gregg |
