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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 168.09

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To: Ibexx who wrote (84311)	10/20/2000 10:25:53 PM
From: Ibexx	Read Replies (1) of 152472

PART III: Prudential Volpe on QUALCOMM ASIC sales are a function of market share and ASPs We estimate that QUALCOMM enjoys an approximately 90% market share in CDMA chipsets in the most recent quarter owing in part to the company's proprietary position. QUALCOMM should lose some of this market share as Nokia strengthens its CDMA product offering; however, we believe the company should maintain a dominant position thanks to strong relationships with other handset OEMs and the coming transition to IX technology. We believe QUALCOMM has at least a 6 month lead in third-generation cdma2000 technology. The company will have significant competition for W=CDMA chipset but should still be a market leader thanks to a strong technology portfolio and relationships with many second- and third-tier handset OEMs. We are modeling between 25%-40% market share for W-CDMA chipsets. Our ASIC assumptions, which are based on QUALCOMM's September fiscal year-end, are as follows: (Table ommited here due to its size and complexity If interest, however, I could provide specific numbers.) Licensing and royalty appear intact QUALCOMM has a strong patent portfolio that should allow company to maintain its royalty rate for W-CDMA near the levels achieved for CDMA. There is a great deal of debate over this single issue in the investment community but we believe that the company is correct in its repeated confirmations that it will receive the same rates. We also believe that the recent decision to spin off its SIC business could further strengthen QUALCOMM's intellectual property position by separating the royalty business into a separate unit; however we still need to see further details on the royalty relationships over the next several months. The company's strong royalty position is one of the main reasons why QUALCOMM is now 3G agnostic, because it believes that it will receive payments, which are essentially pure profit, whether a carrier chooses cdma2000 or W-CDMA. Our royalty assumptions, which are based on QUALCOMM's September fiscal year-end, are as follows: ---------------------------------------------------- F00E F01E F02E F03E F04E F05E ASP,CDMA phone $ 210 179 152 140 135 130 Royalty rate cdmaOne % 4.5 4.5 4.5 4.5 4.5 4.5 /2000 cdmaOne/2000 handset $ 602 672 862 1095 1393 1666 royalty rev(M) --------------- ASP, W-CDMA phone $ 350 300 260 210 Royalty rate W-CDMA % 4.0 4.0 4.0 4.0 W-CDMA handset $ 212 574 1303 1418 royalty rev (M) --------------- Infrastructure royal. $ 86 90 140 160 80 40 --------------- License and Royalty $ SUMMARY One-time license rev 30 30 30 30 30 (M) QTL: Licenses 681 800 1245 1829 2775 3124 (Lic. Dev. Rev) ----------- (To be continued) Ibexx

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