My notes/take on the earnings release and CC: [bracketed material=my editorial adds](figures in 000s)
(Dumb ol' me left notes at office, so off the top of the head:)
1-Segment reporting in the earnings release [major evolution, makes Q results much more transparent] shows handset lost $39,983 pre-tax in FY99, which, pro forma the sale of the handset division, would add about $.13 cents per share on an after-tax basis (if my calculation is correct) for the year--using 194,220 weighted average shares outstanding;
[Interestingly, management has, by segment presentation, given transfer pricing to each division as if on a stand-alone basis--thus, handset division and ASIC division are treated as if royalties are paid to the QLC (or QCL)--licensing and royalty income. This will tend even more to emphasize Q's IPR];
2-Volume increase in ASIC sales (triple digits) for the quarter and YOY far exceeded the 29% revenue increase from chip division, showing just how significant ASP erosion has been in ASICs as well as handsets;
3-ASP of handsets now probably well under $200; component shortages that affected margins and volumes now beginning to come under control; [I think TT indicated that margins on handsets were negative in Q4, this after management expected operating margins of at least 10% in the Q2 CC];
4-TT gave guidance of mid-$.90's sequential Q1 earnings for 2000; [very conservative, especially given estimates that management was comfortable with projections of 70 million ASICs for FY2000; either that, or ASP erosion will be far worse than this quarter--more on this topic below; from $.91 to estimated $.96, let's say, is not exactly what you would call stellar sequential growth];
5-R&D and SG&A were down YOY mainly due to elimination of infrastructure division's associated expenses in those categories;
6-MOT--no developments that management could address at this time in the license dispute; comments on MOT's chip announcement {IJ: "Yes, we did notice that..." or some such sly retort) have been well covered on the threads;
7-INTC and DSP--IJ said they were looking at it, would probably do the deal [the interesting comment that caught my ear was IJ's characterization that there were "important" issues in this negotiation--I think that Q is going to evaluate it long and hard];
8-China--IJ said that he had met with MII reps in Geneva; productive discussions; hard to read because of the "up and down" political environment in PRC [thanks again, Slick Willie]--bottom line, Q is powerless to control the outcome or timing of same of official support for a rollout of CDMA by Unicom or any one else duhhh!!, as if we didn't already know];
9-non-recurring charges to income for Russia/Ukraine were taken in the quarter;
10-HANDSET DIVISION SALE: Had preliminary discussions with several prospective purchasers. IJ said the priorities in getting a deal done were a) keeping commitments to customers; b) getting a buyer with strong marketing and branding; c) strategic ASIC purchase commitments--10 years [I think IJ said]; and d) price. Hopes to announce by year-end. [This becomes a bit worrisome to me: sounds no closer to a deal than at the end of September--would be a major hit to the Q and the share price if management doesn't get a clear and unequivocal positive out of this transaction--a little like saying what your sin qua non is going into a game or a deal and coming away without it--jmho];
11-$1.6 billion in cash and equivalents--[NO ONE PRESSED IJ ON THIS BUT THE ADDITIONAL SHARES INVESTED IN T-BILLS HURTS EARNINGS]; would love to see Q somehow get Nextwave spectrum];
12-Korea--someone (cfoent?) on one of the threads already made the point that IJ said Korea pretty well saturated, but buys of replacement handsets and data-enabled handsets would keep Korea going; Japan--rollout of 64kbps data enabled phone--IJ looking to strong growth from Japan; [no mention of India--a bit of surprise--thanks Labrador or slacker];
13-[THE REAL MEAT OF THE CALL, IMO, MANAGEMENT BEGINS TO LAY OUT ITS PLAN FOR THE NEXT TWO YEARS AND THE BASIS FOR THE NEXT GROWTH PHASE FOR CDMA AND Q. IMO, FY2000 WILL BE SEEN AS TRANSITIONAL, AND IF THERE IS A DIP--I.E., A SLOWING OF RATE RATE RATE OF GROWTH, IT WILL BE DURING THIS PERIOD AS CDMA ONE/IS95 IS IN MATURING STAGE]; IJ and Don Schrock [been very impressed by him in the last two CCs and at NYC analyst meeting] say that carriers are now anxious to begin testing and rolling out ixrtt chip (compared with the MOT chip), which will double voice capacity and provide 38.4kbps [I think that's right--don't have my notes--I think 64kbps is in Japan] data speed, and without any need for upgrades/additional investment on the existing CDMAOne infrastructure. Don and IJ thought this roll out
would accelerate at the end of calendar 2000. THEN, HDR for mobile (from 400-500 kbps up to perhaps 1mbps--rates lower due to need for handoff) and home (up to 2.4mbps) COULD roll out within a year or so after that. Question was asked whether carriers had displayed any interest in HDR, and IJ said there would be a demo next week where carriers could "kick tires" and that "yes, there has been interest". As noted on threads, IJ theorized that HDR for home/mobile could be made available for between $20-$40 per month.
I am sure there was more, but I just can't recall.
Steve |
