Negative comments from Wojtek eh?
He is really thoughtful. Just came out with a report suggesting that QCOM's royalties alone are worth $130 share, but is now all worked up about a temporary component shortage. With friends like him, who needs enemies?
Seems like yesterday that the shorts were pointing at a one month slowdown in Korea as proof-positive that the it was game-over for Qualcomm. Five months later, this was a forgotten issue; although, if I recall, with the help of the ever clever Wall Street Journal, they did managed to carve 25% off the stock price before it marched on to new highs.
The current 'controversy' is so absurd that it borders on sad. Qualcomm's second quarter press release specifically indicated that a component shortage could limit the handset opportunity for the September quarter. I presume that those panicked by recent developments are (a) illiterate or (b) suffering from short-term memory impairment. More comically, when Mark Roberts essentially repeats management's comments in a First Call note, the herd concludes that Armageddon is upon us (and the bears promptly summon the Four Horsemen of the Apocalypse).
Mark Roberts also indicated that Irwin was 'cautious' on China. Well, as far a I can tell, Irwin has been cautious on China for the last several years. I believe he views the market as an eventuality, but one with unpredictable timing. No new news there either. Lost in the ruckus is a $200mm CDMA contract booked by the devil incarnate itself...Ericsson. The profundity of this development, along with Ericsson's recent prognostications regarding CDMA infrastructure growth and market share seem altogether lost on the unwashed masses.
For all the hew and cry, I view the component shortage in a fashion diametrically opposed to that of our erstwhile Cowen -based sage. CDMA subscriber growth has accelerated beyond vendors' expectations, so they are capacity constrained and we have a component shortage. Said subscriber growth will drive ASICs and royalties, far more important profit centers for Qualcomm, and this prosperity will be even more apparent during the calendar fourth quarter. Contemporaneously with the aforementioned strength in ASICs and royalties, one might reasonably expect a mitigation of the component shortage, coupled with greater handset volumes and wider handset margins.
So, while panic-stricken children dash for cover worrying that September many exceed expectations by a lesser amount than previously hoped, they miss the obvious: the stage is being set for a rather interesting calendar fourth quarter.
Wall Street is an interesting place. So much emotion, so little thought.
Have a good weekend everybody,
Gregg |
