Bill Davidson Presents tomorrow at the Roth Capital technology Conference (3/16 –11AM P)
investor.qualcomm.com
IMO, Bill’s one of the best at telling the QCOM story, and hopefully the format tomorrow will again afford Bill the opportunity to call attention to QCOM’s unique robust growth characteristics.
Qualcomm is positioned for strong growth in many of its markets. Shown below, are a number of metrics reflecting strong growth in Qualcomm’s key markets as taken from (1*) Morgan Stanley’s Mobile Internet Report issued 12/15/2009 (www.ms.com/techresearch), and (*2) Deutsche Bank Global Handset Model – Feb 2010.
Despite Qualcomm’s disappointing FY10 guidance, which reflects in part residual effects from significant macro-economic issues, Qualcomm has several major R&D efforts “on the launching pad” that suggest good things just have to happen soon. For example, ramping volume of Snapdragon devices with their much higher device (QTL) and chipset (QCT) ASPs have got to positively impact Qs 2H2010 results dramatically. Also, we should soon see benefits from new handset partnerships with Nokia and Motorola as well as accelerated ramping of Android devices, the vast majority of which are Qualcomm chipset enabled. The China 3G market should also begin to accelerate this year.
Wireless Markets / Device Unit Sales-
..+ The worldwide handset sales growth rate is slowing, but Qualcomm markets, benefiting from the migration of 2GSM subs to 3G/ 4G, reflect robust growth. Note: For all intents & purposes, Qualcomm was excluded from participating in the vast majority of 2G/ 2GSM markets by restrictive governmental standardization/ authorization regulations.
..+ The great majority of QCOM’s markets and sub-markets are growing robustly
…..+ Overall Market -Mill units (*2)
………………………………..……....2008.......2013 …..(5 year CAGR)
……..+ 2GSM………………………... 731…….422
….....+ QCOM’s Primary Markets
….........+ CDMA2X………………..….200…….234
…….....+ 3GSM/ WCDMA………...…266….....741
……..……..s/total……………………....466…….975………16%
………..+ Other……………………..........5..….......3
…….+ Total…………………………..…1,202….1,400……….3%
…+ Sub-Markets (*1—Note: some categories overlap)
…………+ 3G Enabled Smartphones……92…….656……48%
…………+ WiFi Enabled Smartphones….56…….526……57%
…………+ Netbooks………………………16………63……32%
…………+ Internet Tablets…………………1………49…..117%
Paul Jacobs’ 2010 ASM presentation focused on many of Qualcomm’s growth market opportunities. He categorized those opportunities into three segments:
….1 Near-term - New Devices, Smartphones, and Computing
….2 Mid-Term – Mirasol, LTE, FLO
….3 Long-term- M2M, Healthcare
Near Term-
+ Smartphones- 3G Internet Enabled – 5 year CAGR 25%
+ Notebooks PCs- 5 year CAGR 14%
……w/ Gobi ramping
……….Gobi customers account for 84% of notebooks Sales (IDC 1/2009)
………..HP
………..Acer
….…….Dell
………..Toshiba
………..ASUS
.…….…Sony
………..Fujitsu/ Fujitsu Siemens
+ Smart books (internet tablets)- 5 year CAGR 117%
….. from new partners
…..…Lenovo
…..…HP
…..…Dell
+ E-readers (embedded other devices) 5 year CAGR 63%
+ New chipset partners ramping 3GSM / WCDMA Devices
…+ NOK devices
…+ MOT devices
+ Win7 mobile devices—
……QCOM is first chipset company to support Win7 Mobile (with Snapdragon) ---- Devices by 2010YE
qualcomm.com
………PDAdb search on Win Mobile 7 yields 4 Devices ALL Snapdragon Enabled
Message 26383421
+ Snapdragon Devices Ramping-
…… PDAdb Search finds 39 Snapdragon Devices- QSD8650 (6), QSD8250 (33)--- Many launching in March / April 2010
Message 26381995
…………………………2010……Jan…Feb…Mar…Apr…May…Jun…Jul…Aug…Sep…Oct…Nov…Dec
…Devices By Launch Date - accum
……..QSD8650………….2……………………………………………4…………………5…….6
……..QSD8250………….7……….9…………..13…..25…..30………….31…………33
+ Android devices ramping
……Most Android Devices are powered by QCOM Chipsets as reflected by the below PDAdb search on generic Android devices by descending release date (40 max permitted). Of the 40, 30 have CPUs identified and of those 30, 24 (80%).are MSM/QSDs.
Message 26385555
…………………………2010……Jan…Feb…Mar…Apr…May…Jun…Jul…Aug…Sep…Oct…Nov…Dec.
…Devices By Launch Date – accum
…………………………………………………………..19……30…..37….88….39……40
+ 3G Ramping in Developing World (2010 ASM)
….+ Connecting the Unconnected
……..+ 2012- Emerging regions expected to represent >50% of 3G shipments
……..+ China CDMA growth- 2008- 2013 ~ 5 years 1000% increase
……..+ India CDMA growth- 2008- 2013 ~ 5 years 160% increase
……..+ Latin America CDMA growth- 2008- 2013 ~ 5 years 400% increase
……..+ QCOM Products supporting 3G Growth in Emerging Regions
………..+ Plaza
………..+ BREW MP
………..+ QCOM Single chip solutions
………..+ Qpoint
………..+ Wireless Reach
………..+ OMH
………..+ Kayak
.+ BREW MP- Quick Messaging Devices
………”The market is growing fast. Since AT&T pioneered the category in 2008, Quick Messaging Devices have come to represent roughly 30 percent of the recent phone sales. Brew MP takes this category to the next level. AT&T expects roughly 90 percent of phones in this segment to run the platform by the end of 2011.
Message 26383386
……….+ Support for Multiple Popular Operating Systems (2010 ASM)
…………….+ BREW MP
………………..+ Supporting Multiple Device Tiers
…………………..2009- ~23% of volume
…………………..2014- ~52% projected by 2014
………………..+ New Carrier Commitments
…………………....AT&T
………………..…..Sprint
…………………....Telefonica
………………..+ Handset Company Commitments
………………..…..HTC
………………..…..LG
………………..…..Samsung
………………..…..Panteck
+ Consumer Electronic (CE) Devices / WiFi Chips
…….…Quietly, Qualcomm has been ramping volume of their two standalone WiFi chips.
……..…..+ WCN 1312- Handsets & Mobile Devices
………....+ WCN 1320- Consumer Electronic Devices
qctconnect.com
“Scheduled for sampling in the second quarter, the WCN1312 chip is expected to be in volume production by the fourth quarter of 2009,”
…….Not mentioned during the ASM, Paul did “indirectly” touch on the WiFi market in his 2010 CES keynote speech.
……. “So all these kinds of things (CE- consumer electronics) are going to be better and much more useful when they?re connected up to the network, and actually, also to each other.
So we believe that all these consumer electronics devices are going to end up being connected. And it?s not all going to be connected over a cellular connection, that we?re known for obviously, but we?re also working on other radio technologies and they?re going to connect up these things too.
The Morgan Stanley report discusses the importance of WiFi as being”…critical to offload stressed carrier 3G network traffic..” It further states that 319 million WiFi chips were sold in 2008, 42% YoY.
Morgan Stanley further discusses the “New Computing Cycle Characteristics” wherein each new cycle expands product demand by a factor of 10. Their chart reflects Mobile Internet device units growing to 10 billion from the prior Desktop Internet cycle of 1 billion units. Devices included in the Mobile Internet category include more than just phones: smartphones, kindle tablet, mp3, cell phone/pda, car electronics, home entertainment, and wireless home appliances.
As to potential WiFi chips sales, they could be huge, with billions of units sold per year with current ASPs ranging for $4 -$8 per WiFi chip.
In should also be noted that QCOM’s new standalone WiFi chips were designed to support 802.11n incorporating many of Q’s innovations (MIMO, etc). 802.11n was recently approved and is most advanced standard which is just now starting to be deployed within the industry as higher volumes of internet capable CE devices begin commercialization.
PDAdb Search on 802p11n devices Yields 14 Devices. Excepting Apple iPad, 4 of the other 8 are Snapdragon enabled. The manufacturer of the WiFi chip cannot be discerned from the PDA database, but since Q’s WiFi chips were to be in volume production during 4Q2009 the likelihood is promising.
Message 26386200
Mid-term-
+ Mirasol displays in low volume later in 2010
Paul, in his recent Morgan Stanley interview again stated Mirasol enabled e-books are planned for sale before year-end 2010, with volumes building gradually during 2011 and ramping in late 2011 and 2012.
…+ Per the ASM rep, Their first major commercial product will be 5.7 inch displays for the lower volume e-readers market. These displays will cost less to produce that the current kindle displays which sell for $60 each. Their plans are to support commercial products for the 2010 Christmas selling season.
Slacker’s recently posted article estimates e-book readers will grow from 5M in 2009 to 98M by 2018, a 36% 10 year CAGR (per E Ink VP)
+ LTE chips-
.….Qualcomm has three LTE chips in development per 4/09 brochure.
……+ MDM9200- LTE DC-HSPA+ EDGE sampling date mid 2009---- Data Optimized
……+ MDM9600- LTE DC-HSPA+ /DOrB, EDGE sampling date mid 2009---- Data Optimized
……+ MDM8960- LTE DC-HSPA+ EDGE sampling date mid 2010--- Handset Optimized (1GHz ap)
Per Modoff- 3/05---” At the Mobile World Congress we also heard a number of vendors talking about 4G chips for LTE. We continue to see LTE as a long-term event. While we will have early data card-only
deployments this year, we expect limited volumes in 2010 and 2011. We should start to see
handsets in 2012, but do not expect real volume (>10 million units) until 2014. STE and
Qualcomm both discussed this, with Qualcomm running demos in their booth. We did not
see it in their booth, but we did hear about Infineon making progress on their own LTE
developments.:
Long- term
+ M2M (2010 ASM)
…………The Internet of Things- nPhase
…………....Partners
……………...Verizon
…………..….Vodafone
…………..The Things
……………..Electric meters
……………..Home thermostats
……………..Home Electronics
……………..Industrial Gauges
……………..Transportation / vehicle monitoring
+ Healthcare / Transforming Healthcare
…………..ECG, smart bandages
…………..Blood pressure, pulse glucometer sensors / external monitors
…………..Smart pills / internal sensors
…………..Pedometer
Considering the growth potential in the above Qualcomm markets, sustained top line growth long term should not be a problem. However, over much of the past several years’, Qualcomm’s top line growth has not always flowed to the bottom line----- earnings / EPS. In order to get the share price on a sustained growth trajectory again, cost containment together with top line growth is a necessity.
Paul’s prepared ASM remarks clearly addressed this issue, as well his responses to many “frustrated” shareholders during the Q&A. With vast sums spent on R&D over the past several years, and with that R&D soon to be harvested, it behooves management to now place their primary focus on cost containment to drive shareholder value in support of Qualcomm’s long term investor base and employees. |
