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Technology Stocks : The New Qualcomm - a S&P500 company

QCOM 174.54

-1.2%

Nov 13 3:59 PM EST

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To: Ramsey Su who wrote ()	12/30/1999 3:57:00 AM
From: lkj	Read Replies (4) of 13582

$700/share - are we getting ahead of ourselves? The Paine Webber report assumes the following: Our estimate assumes that 3 billion phones are sold in 2010 with an average sale price (ASP) of $180 and a royalty rate of 4.5%. If we apply a 97% operating margin and 35% tax rate we are left with $13 billion of free cash. How can anyone make an estimation for something as far out as 10 years? While CDMA has the clear lead over competing standards in the next 3 or 5 years, it is foolish to assume that nothing superior to CDMA will arrive in the next 10 years. In fact, Lucent's directional antenna that introduces space as a new dimension to communications could change the landscape of wireless communications. (I am not an expert on this technology by Lucent. It was announced almost three years ago. By using 10 antennas in different directions, it could boost data rate by 10 fold.) And the 4.5% royalty rate is questionable. Everyone is trying to work around some of Q's patents. Even if CDMA is the only standard in 10 years, I am not sure we can still get 4.5%. And I have no idea how this guy could predict a $180 ASP in 2010. Not every handset will have 5Mbps in 10 years. Some will, most will not. And for the ones with high data rate capabilities, they will be called modems rather than handsets. And true handsets might only cost $20 to make. Just look at how fast matured products such as the PC dropped in price. We might see sub-$10 handsets in 10 years. I am not saying that Q will not collect $20 billion in 2010. Sure, there is even the chance that the world will crash and burn in 10 years, but what is the likelihood? A prediction like this is just as bad as the ones that said CDMA would never be commercialized. Unlike most of you, I am sadden that I have to sell a portion of my best performing stock because of irrational exuberance and irresponsible predictions. :( Khan

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