Apollo,Mike, et all, “The big problem I've always had with Qualcomm is that the potential market is so large that it's truly difficult to know what the growth can be. (Nice problem to have, but still an investor's problem.)”
The “problem”, “what the growth can be”, and when will it be transferred to the stock price?
The simplistic metric I’ve used for sometime now is the current number of CDMA subscribers vs the addressable wireless market when 3G dominates the market. Early on, it was 100M growing to 1B (10X), now its closer to 170M growing to 2B to 2.5B (15X) as most consultants estimate the number of wireless subs to be over 2B by the end of 2007. A recent Seimens official was recently quoted saying- “...all European handsets will be 3G capable within 7 years (2010).. And, the Chinese MII was recently quoted saying- “ “By then (2007), an estimated 15 per cent of the mainland's mobile-phone users would be using 3G (55M of 370M), rising to 80 per cent by 2010 when the pool reaches 600 million..
Qualcomm will receive approximately 5% royalty on most all handsets sold world wide within 7 years, and will (IMO) continue to have a large share of the chipset business (75-85% of CDMA2000, 50% +/- of WCDMA.
CDMA modules with imbedded Qualcomm chipsets are now starting to be fabricated by Kyocera and others for M2M applications (medical devices, measuring/sensing devices, vending machines, asset (homeland security) tracking, child/ elder protection/tracking etc, etc) which could even be a larger market than the subscriber (human) market.
New revenue sources in addition to handset / module sales are also on the horizon including BREW, Qchat, Qconnect, AgpsOne modules, etc.
Just how big Qualcomm’s market will be is difficult to quantify at this time.
The second question as to when that phenomenal growth will be recognized by the market forces and reflected in the QCOM share price is another question as the “analysts” are IMO currently significantly underestimating Qualcomm’s growth with a consensus 3-5 year growth rate of only 15%.
Perhaps that catalyst will be when China announces their technology choices for 3G which should be within the next several months. It would appear that Unicom will choose CDMA2000 with Mobile and the other two land line still up in the air. The longer it takes for WCDMA to stabilize and show economic/ technical viability, the more the scales tip in favor of CDMA2000. Qualcomm of course wins in either case, but the magnitude would be much larger in CDMA2000 prevailed in a couple of the other Chinese carriers. The Chinese 3G decision can not be deferred much longer as I would imagine their networks have to be built, tested, and in proven operational status at least a year before they host the Olympics in 2008.
Some of the other catalysts noted sometime back are listed as follows ( some have actually occurred)-
1. Nokia announces they will use Qualcomm chipsets
2. AT&T (or other) U.S. carrier switches to CDMA
3. VOD (or other European carrier) switched to CDMA
4. Asian GSM carrier switches to CDMA
5. VOD trials GSM1x
6. Nextel to use CDMA2000
7. PCS or VZN to use 1x EV-DO
8. Supreme Court rules for Nextwave
9. PCS or VZN 1X network gain grossovers from GSM carriers
10. KDDI 1x Network gains crossovers
11. China Unicom selling only MSM6300 chipset phones for their GSM network
12. VOD selling only MSM6300 chipset phones for their networks
13. Dell, HP- Compaq, etc use CDMA2000 exclusively in their laptops
14. China land line carriers choose CDMA2000 for 3G. |
