Alex Cena's report on NOK/Telson deal>
Salomon Smith Barney ~ June 23, 2000
QUALCOMM, Inc. (QCOM)
QCOM: NOK's Jt Pact with Telson Uses QCOM 1H (Buy, High Risk)
ASICs Mkt Cap: $54,695.6 mil.
June 23, 2000 SUMMARY
* This AM, Nokia announced its agreement to partner with
TELECOMMUNICATIONS Telson for the production of mobile phones based on
EQUIPMENT CDMA. We believe this is positive for both Nokia
Alex M. Cena (NOK-$56, 1M) and Qualcomm.
* Nokia will be able to accelerate its progress in the
CDMA-based mobile phone market & the Telson phones use
Karen O. Nielsen Qualcomm's ASICs so it's obviously an indirect entry
into Nokia for Qualcomm.
* Some Nokia phones will now be able use the QCOM ASIC
Thomas Robillard without Nokia swallowing its pride.
JR * Nokia will use the Telson phones to enter the Korean
market in 1Q2001 and use the phone to complement its
product line throughout the rest of the world.
* Either Telson or Nokia will have to pay royalties to
QCOM but not both. However, it will not matter which
one pays since Telson and Nokia's royalty agreements
are about the same.
FUNDAMENTALS
P/E (9/00E) 62.0x
P/E (9/01E) 47.1x
TEV/EBITDA (9/00E) NA
TEV/EBITDA (9/01E) NA
Book Value/Share (9/00E) NA
Price/Book Value NA
Dividend/Yield (9/00E) NA/NA
Revenue (9/00E) $2,986.3 mil.
Proj. Long-Term EPS Growth 0%
ROE (9/00E) 113.8%
Long-Term Debt to Capital(a) NA
QCOM is in the S&P 500(R) Index.
(a) Data as of most recent quarter
SHARE DATA RECOMMENDATION
Price (6/22/00) $68.25 Current Rating 1H
52-Week Range $179.31-$31.69 Prior Rating 1H
Shares Outstanding(a) 801.4 mil. Current Target Price $200.00
Convertible No Previous Target Price $200.00
EARNINGS PER SHARE
FY ends 1Q 2Q 3Q 4Q Full Year
9/99A Actual $0.08A $0.10A $0.19A $0.23A $0.62A
9/00E Current $0.26A $0.26A $0.27E $0.31E $1.10E
Previous $0.26A $0.26A $0.27E $0.31E $1.10E
9/01E Current NA NA NA NA $1.45E
Previous NA NA NA NA $1.45E
9/02E Current NA NA NA NA NA
Previous NA NA NA NA NA
First Call Consensus EPS: 9/00E $1.08; 9/01E $1.42; 9/02E NA
Calendar Year EPS: 12/99A $1.70; 12/00E NA; 12/01E NA; 12/02E NA
OPINION
NOKIA/TELSON PACT POSITIVE FOR NOKIA AND QUALCOMM. This morning,
Nokia announced an agreement to partner with Telson for the production of
mobile phones based on CDMA. We believe this is positive for both Nokia and
Qualcomm.
The pact should help Nokia to accelerate its progress in the CDMA-based
mobile phone market while the Telson phones use Qualcomm's ASICs so it's
obviously an indirect entry into Nokia for Qualcomm. Under this
arrangement, some Nokia phones will now use the QCOM ASIC without Nokia
swallowing its pride.
Nokia will use the Telson phones to enter the Korean market in 1Q2001 and
will use the jointly developed phones to complement its product line
throughout the rest of the world. Either Telson or Nokia will have to pay
royalties to QCOM but not both. However, it will not matter which one pays
since Telson and Nokia's royalty agreements are about the same.
Telson already purchases ASICs from Qualcomm since it sells mobile phones, on
an OEM basis, to Motorola, LG Communications and KT Freetel. In addition,
alternative sources for ASICs still have not made in roads. This is a way
for Nokia to be able to accelerate its progress without swallowing its pride
and going to Qualcomm to purchase its ASICs directly. Initially, the
Telson/Nokia phone will be sold in Korea beginning in the 1st quarter of next
year and will be used to complement the Nokia product line throughout the
rest of the world later next year.
TELSON's RELATIONSHIP WITH QUALCOMM PRE-EXISTED THE NOKIA
AGREEMENT. In February, QUALCOMM announced it had entered into a worldwide
CDMA subscriber unit license agreement with Telson (Seoul, Korea). Under the
terms of the royalty agreement, QUALCOMM granted Telson a license under
QUALCOMM's proprietary CDMA technology and patents to develop, manufacture
and sell subscriber unit products for cdmaOne cdma2000 and High Data Rate
(HDR) air interface technologies. The license also includes the rights to
develop, manufacture and sell CDMA data modem cards for wireless data and
voice applications. |
