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Technology Stocks : The New QUALCOMM - Coming Into Buy Range
QCOM 167.88-0.1%11:05 AM EST
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To: Jim Mullens who wrote (5122)5/4/2009 2:47:02 PM
From: slacker7111 Recommendation  Read Replies (1) of 9129
 
Total World Mobile Subs……….3,933 million
GSM/WCDMA………………….3,540
WCDMA…………………………..287 ………………..7% of tot

Qualcomm doesnt collect royalties from wireless subscribers and even units is only a proxy for Qualcomm's actual addressable market, which is total wireless device revenue. This is the statistic that matters when you are looking at the future growth of Q's royalties.

The problem is in getting an exact number for total device revenue. While the unit numbers are publicly available for handsets, the research houses save the ASP numbers for those paying $3000 for their reports.

However, let's take a look at the ASP numbers for the big five plus Apple and RIMM in the 1st quarter of this year. 


           Devices   ASP
Nokia      93.2m    $86.45
Samsung    46.3m    $124
Sony E     14.5m    $159
LG         22.6m    $148
Motorola   14.7m    $124

Apple       3.8    ~$600
RIMM       7.2m    $370


If you take the average of those seven vendors, you get an ASP of $129.50. These vendors represent nearly 80% of the total handset market and it is likely the other 20% have even lower selling prices (the Chinese vendors would swamp the higher selling prices in Japan).

If you use those ASP numbers for the year, you get a handset market that is worth roughly $155 billion. Now throw in another 100 million non handset wireless devices selling for an average of $150 per device. This way overestimates the size of the non-handset market. So what is Q's royalty market share using these numbers? It is 66.5%. Think about that...Q collects a royalty on over 2/3's of all wireless device revenue. There just isnt that much left.

Now for the worst news....total handset revenues are DECLINING. Some of this is due to the recession, but the trend is clear. Growth has been slowing for years and we would need a real inflection point to even get back to 10%. The huge increase in smartphone sales hasnt been enough.

Yes, connected device revenues are going to increase for a while but it is very unlikely to be enough to bring back >10% growth to the overall device market. The law of large numbers catches up to everybody and it clearly has for the wireless device market.

FWIW, I know that my methodology isnt the best, but these numbers are in the ballpark.

Slacker
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