Thread: Merrill Lynch released an updated report on QCOM today titled, "QUALCOMM:Good News for the Long Term." ML maintains it Neutral intermediate and Buy, long term ratings. Here is part of the report:
Technical Rating: Investment Highlights:
· Yesterday, QUALCOMM announced an
agreement with China Unicom that will pave
the way for CDMA to be finally deployed in
that country. While this is good news for
QUALCOMM in the long term, it does not
change our view in the intermediate term.
· We do not expect CDMA service to be
launched in China for several months, so this
announcement will likely have a negligible
impact on QUALCOMM's fiscal 2000 EPS.
Our fiscal 2001 EPS estimate already assumed
some modest acceptance of CDMA in China.
Fundamental Highlights:
· This agreement had been widely anticipated,
although it took considerably longer to finalize
than expected.
· China Unicom expects to build a network with
capacity to serve up to 10 million users in 160
cities by the end of 2000, although funding is
still an issue.
· There may be some upside to our fiscal 2001
estimates if China were to ramp as quickly as
some other countries, but we think it's too
early to make any changes at this point.
[snip]
We would not expect the initial phases of the network to
be completed until September, so we should not expect to
see CDMA service widely available in China until the end
of this year. This will not likely help QUALCOMM's
fiscal (September) 2000 results, and our near term
concerns on earnings growth remain. Furthermore, it is
still unclear how China Unicom will fund their network
construction and operations.
However, our fiscal 2001 models do reflect some modest
adoption of CDMA in China (about 5 million users), and
we recognize that there may be some upside to that
assumption. We saw 2 million CDMA subscribers added
in the first 12 months in Japan, 3 million in Korea, and
2.5 million in the U.S. China obviously has a much larger
potential subscriber base than these three countries,
although it also has a significantly lower GDP per capita.
At this point, we believe it is too early to change any of
our model assumptions or our EPS estimates.
Lynn |
