You don't feel comfortable with his 2 assumptions that in 10 years 85% of all cell phones and connected appliances will be CDMA based? Or is 2 billion appliances too aggressive for you?
Or do you feel he wasn't correct in assuming that Q will receive royalties on those 2 billion appliances?
"Correct" doesn't enter into it. Those are all definite possibilities, but I don't see anything you can hang a 10 year revenue projection and a $1000 price target on. There is no way anyone can predict Qualcomm's business to anything close to a degree of certainty that enables you to do that. There are too many variables, especially since this is still an emerging technology. Maybe something better than CDMA comes along. Maybe other companies find a way to engineer around Qualcomm's patents. Maybe Qualcomm is forced to negotiate much lower royalties for their patent portfolio. Maybe the other businesses Qualcomm engages in come up losers and erode away any value they derive from their CDMA business. And so on. Sure there are plenty of positive outcomes one could counter with, but the fact remains that the future is very uncertain. I find it ironic that no one blinks an eye when Piecyk projects 25 billion in royalties (sure it's possible, but let's see some signed agreements first), but everyone has a hissy fit when Snyder projects that Globalstar will go bankrupt. Wake up folks, he may have imputed much more certainty to his prediction than was warranted (sound familiar?) but a G* bankruptcy is a definite possibility.
Peicyk's analysis didn't factor in Q's cash flow from their ASIC division (assuming they don't jettison the division for some odd reason) It was based on royalties only.
True. Let's say he assumed that the ASIC division would break even. Based on what we've seen from infrastructure and handsets, that doesn't sound like an outrageous assumption. And I do hope that 10 years from now Qualcomm is doing more than just trying to rake in money from their patents. If that's all they can do, they are nothing more than an IDC with a slightly better patent portfolio. If I thought the only thing in Qualcomm's future were royalties, I'd sell my stock right now, even if I knew that Piecyk's $25 billion was in the bank.
Strange as it may seem, I'm fairly optimistic about Qualcomm's future. But compared to what I'm responding to here, I can't help but sound like Dr. Doom. So, much to everyone's relief, these will be my last words on the subject because there isn't much more to say. Anyone who chooses to believe that Piecyk is a sound analyst who produced a sober, disinterested analysis either doesn't need my help, or is beyond it. |
