Rebates and valuation of the handset division:
i) actually JG, given that the $99 price of the Thin is usually conditioned on signing at least a one year service contract, $100 (gets you to $200) amortized over 12 months or more (figure more, if consumers are happy with the service and phone and PCS or BAM keeps competitive with other rate plans) does not seem outsized to me.
2) Ramsey, Using 1 million handsets per month and $200 per handset, annualize sales is $2.4 billion. What should something like that be worth? I am not aware of previous similar sales. 4X sales is almost $10 billion.
I am not sure that this is the appropriate way to approach valuation of the handset division, for two reasons--one is that Q may be looking as much to subcontract the manufacturing to a vendor with existing operations and potential for economies of scale, as noted in the PR; let the sub worry about sourcing, margins, etc.
Two, what Q is really selling here is its technology and design, since it has already acknowledged that the business of making the boxes (handsets) themselves is closer to a commoditization business. There are many vendors in the business--MOT, NOK, ERICY, VOD, even some other Europeans or domestic subcontractors--which are already in the business and would not be expected to pay some multiple of sales for a business which they are in already and could add factory space and assembly lines to accommodate Q's expected volumes. So what the JV partner or "buyer" is really getting is the opportunity to spread its fixed (and some variable) costs over higher revenue base, with perhaps some higher margin phones and a groundfloor stake in Q's phones. I am just not sure that this warrants enterprise valuation approach.
Having said this, I agree, and posted earlier today across the way, that there will be further available capital, added to the $1.4billion cash and cash equivalent. My preference is for the Q to be forward looking and leverage the CDMA technology to widen its data pipe potential through R&D and/or acquire complementary technology that can be compatible or morphed with a CDMA RF interface. This protects and expands the CDMA space and leverages future ASIC sales and royalty flows and establishes further the space for data uplink and downlink, which will be the fount for all wireless riches, regardless of how one denominates the specific "features" that are in the handset and enabled by service providers. JM2C.
Did you put leis on the Fiji women?
Best. Steve |
