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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 157.80+0.9%3:59 PM EST
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To: DTA who wrote (8133)2/7/1998 3:39:00 PM
From: arun gera  Read Replies (2) of 152472
 
Qualcomm's gross margins in the next quarter are likely to be about 18 percent. That is definitely a low margin business. Can you name companies making much good net margin with that low gross margins. I can think of SMOD as one company that made money with margins as low as that, but they hardly had any R&D costs.

Lucent sold its phone business to Phillips (or was it Siemens?). Does anybody know what was the price of that transaction. What was the valuation of the cellphone division in terms of market cap/sales? Maybe be worthwhile comparing to Audiovox.

In other valuation the royalty business of Qualcomm is worth 1.2 to 1.5 billion, by itself. $150 million annually with a steep growth rate is definitely worth that much. The Omnitracs business should be worth about $300-400 million at least with recurring revenue of about $500 per truck and a growth rate of 15 percent(look at valuations of much less successful AMSC, Highwaymaster and Geotek businesses). And the infrastructure business should also be worth about $300 million. The Eudora business should be worth a least $200 million (Look at how much Hotmail sold for, $300 to 400 million). The valuation without the handset business is about $2.2 billion.

Even if we take the lowest valuations - say 0.3 time sales for the hand-set phone business, that amounts to about $1 billion. Total inherent valuation for QCOM - About $3.2 billion. What does that convert to stock price?

I just checked - $3.2 billion translates to about $47 stock price. QCOM is somewhat of a value stock below that price. This is without any speculation.

Arun
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