<The price of QCOM asics is denominated in US dollars, that price WILL NOT fall
due to the fact that Samsung and LGI need more. I would assume from my short econ
courses in college that as demand rises the price will follow>
What about new competition? QCOM has licensed there product to others...QCOM's ASICS are further along so they have a competitive advantage....As of now, I don't know who else is selling ASICS? Does anyone?..... However, Korean companies will be complaining about the cost of the ASICs...Which will cause their costs to increase. (GOOD POINT). However, I don't see the supply/demand thing you mention occurring...otherwise the buyers will remember what QCOM did to them later and buy from other vendors....
<Even if Korea makes 0 phones (which of course they
won't) Qualcomm has enough other customers in Japan to buy them out>
What Japanese customer....Sony? The systems won't be up til May in Japan....
< Every QCP-2700 and QCP-820 that they can make they can sell
to American carriers (Sprint, Primeco, BAM, Airtouch, etc...)>
I don't believe this for a minute.....We have approx 1.5 million subscribers in the U.S. after 1 year in service. That is 3 months of production at full capacity....What about the other 9 months? Don't forget foreign sales to Peru, Israel?, and other CDMA systems....( This could help production but not 9 months worth)....The growth in the past 2 years has been in Korea....Lets not fool ourselves.... People were lining up in droves to get PCS in Korea this summer and still are waiting....This demand will dry up or slow down IMHO...
<But let's assume that QCOM makes no money on phones at all
(completely unrealistic but hey, humor me).>
To find this # look at the minority interest line item....The negative amount is 1/2 of the profits from the J.V being paid to Sony....I believe it is positive right now
<They have
Eudora, and NOW that are profitable businesses>
Where did you get this? Was it in the conf call? Perhaps I missed it but I doubt they are making money with Eudora...I have the light version which I got for free.....(student)
<When people slow down
to take a good look at the fundamentals of this company they will realize that even worst case the loss of
royalties are not as important this year as last>
I beg to differ....Royalties are 100% profit....They matter every quarter and every year...Last year without this line item QCOM would have made a loss. THIS IS A FACT. In my model for the company, the royalty amounts are the key element to the valuation of this company. ROYALTIES ARE THE BIGGEST CASH COW OF EVERYTHING. THEY HAVE NO COGS ASSOCIATED WITH THEM EXCEPT THE LAWYERS FEES FROM QCOM'S DEPT. The facts are that the companies are paying royalties against the U.S. dollar which is at 10-15 year highs vs. numerous currencies which results in lower Royalties recognized by QCOM.
<Since last year QCOM has matured, they have broadened their product offerings from
one flavor of phone to 2 (both with much better margins)>
I whole heartedly agree here! HOWEVER, there is now competition which wasn't there last year...Ie. Nokia and Samsung.....Remember that the majority of the value for any high-tech firm is in the continuing value ...My DCF model showed this..... Finally, Samsung now has a HUGE advantage with pricing.....will QCOM prices come down? Only time will tell...Will Samsung prices come down?...Only time will tell....I am not risking it....The risk/return isn't worth it.....
<They have moved away from relying on royalties>
FALSE - SEE ABOVE COMMENT
<one of the major players in the communications game in only a VERY few years. You count
QCOM out and you will be making a huge mistake.>
I am not counting them out....I agree that they are a major player but the assumptions implied within the valuation don't command a high stock price right now.....
<Right now is a buying opportunity. While the hysterical jump ship those buyers are raping them for all they
are worth. 80+ was always a pipe dream but 60 and 70 is realistic. As I sit on my stock and grin I believe
that QCOM will come out in the end smelling like a rose!>
I believe we will see lower prices first.....We will see...I wish you the best....
Gone til tomorrow folks..
Dan Ross |
