Qualcomm thoughts ...
Apollo,
<< Overall, as long as one has a 2-12 year timeline, I think Qcom will be golden... Are there any other Qcom investors on this board, and what do you forsee? >>
I too believe that as long as one has a (minimum) 2-12 year timeline QCOM will be golden and I bolded the '2' on purpose. Some patience is in order. Without elaborating on the rationale, I'm not of a mind that we'll see dramatic growth of Qualcomm's valuation in the next 12 months and I happen to think it is reasonably valued relative to Nasdaq today - much more reasonably valued than many of the 'recovery plays' in the wireless sector today.
Candidly I have been somewhat disappointed in cdma2000 technology adoption by carriers, but all indicators are that we should see an initial meaningful commercial volume ramp for WCDMA handsets from numerous handset manufacturers at about this time next year, and as a consequence we should begin to see material high margin revenue impact commence for QTL over and above royalties for cdmaOne/cdma2000.
Assuming that initial ramp does occur on the anticipated schedule I think we should see much more mature WCDMA handset product and related services a year later and the beginning of a hockey stick in QCT royalty revenue. The single caveat I attach to that is that in order for that hockey stick to start to form, carriers are going to have to loosen the infrastructure purse strings and get serious about buildout starting early 2005. The general state of the economy and capital availability will necessarily have an impact on this.
Despite some inevitable erosion in chipset market share on the cdmaOne/CDMA2000 side, and despite the fact that I personally consider Qualcomm's target of 50% WCDMA chipset market share to be unrealistic, I do believe that QCT's's revenue growth from WCDMA chipsets will more than offset any erosion they suffer on the cdmaOne/CDMA2000 side.
I consider Qualcomm to be a mini-blue chip and I think we are seeing real signs of maturity from the company and its management. I'm much more comfortable with the Qualcomm of today as opposed to the Qualcomm of 2 years ago. Financial reporting is much improved, the GAAP gap is diminishing, cash flow from operations is solid, and their cash hoard relative to top line revenue is enviable. They also happen to be the only wireless comm equipment manufacturer to demonstrate real top line growth this year and their net margins are the highest in the industry.
As for management, I run a little hot and cold on Tony Thornley (on balance I give him positive marks), but I consider Bill Keitel and Dr. Sanjay Jha to be emerging as extremely solid corporate citizens. Overall its a pretty good management team directing the ship. I think it's a little early to worry about the capability of Paul to replace his dad, as I suspect Irwin is going to be with us for several more years.
My money is where my mouth is on this one. Qualcomm today represents 19.5% of my tech equities investments.
Those are quick thoughts. I'll expand a bit more on this after the fiscal year concludes and we have heard management's guidance for the upcoming fiscal.
Best,
- Eric - |
