MSDW report on QCOM today
by: NO_BS_TODAY
10/27/00 12:49 pm
Msg: 290165 of 290185
Qualcomm (QCOM-$72-O) Company Update; Comments On CDMA Louis Gerhardy
We believe the first day of the CDMA Americas Congress was a net positive for QCOM.
QCOM's CDMA technology allows wireless operators to funnel more subscribers into a
fixed amount of spectrum. The large sums paid for new spectrum and the willingness of the
FCC to consider forced spectrum reallocation highlights a potential "spectrum drought."
CDMA technology is becoming more appealing and will be present in 100% of 3G phones,
up from 15% of 2G phones today.
We see a strong new product cycle for QCOM's CDMA2000 1X licensing and chipsets.
We are impressed with the breadth and vigor with which service providers are adopting 1X.
CDMA service providers may have an edge over competitive GSM and TDMA service
providers by aggressively adopting 1X. Sprint PCS and Verizon lead the charge in N.
America, while activity in Japan, Canada, Central and South America, Taiwan, Australia,
New Zealand, and other regions is impressive. The largest S. Korean operator, SK
Telecom, highlighted their successful launch of 1X on 10/1.
QCOM reports 11/2 and we remain comfortable with our C3Q00E and C4Q00E EPS of
$0.23 and $0.27, respectively (each $0.01 below consensus). Due to limited visibility and
potential overhang from the elimination of handset subsidies in S. Korea, we have taken this
cautious approach. Investor's appear to have discounted this event, and we would continue
to acccumulate shares of QCOM; more aggressively on weakness.
We reiterate our Outperform rating and 12-month price target of $100. QCOM announced
yesterday that Fujitsu had extended its license to include QCOM's 3G CDMA intellectual
property, including WCDMA. There are now at least 15 licensees of QCOM's WCDMA
intellectual property and we continue to believe QCOM will receive royalties (at rates
similar to 2G) on 100% of the entire 3G market.
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