Mquarice...
100mil/quarter is an awful lotta dough. I wonder if this could be true, 400mil/year divided by say 70 mil shares is almost 6$ per share..Is this really possible? IMO this has to be an exaggeration.
But lets suppose it is true, what are the implications? At breakeven Q would have earned about $7.50/share last year or about 525 mil., a net margin on 3.5 bil of 15%, which sounds a bit high considering all of the handset returns and bottlenecks. Did I run through the numbers properly?
This would really be astounding but would it make sense to sell off the division now? 3G is going to be the mother of all wireless upgrades and Q ought to be in position to get some reasonable piece of that business, especially after their showcase Mexican network is up and running some variant of CDMA2000. And I would think that IS95 carriers would feel some sense of indebtedness if a converged 3.6x chiprate standard is ultimately achieved. Wireless Knowledge is also going to drive infrastructure deployment in addition to consumer devices. Then there's wireless local loop where Q is running trials all over the place, implementation of which has been hindered by serial financial crisis. Maybe it's worth taking these losses for another year or so, especially if Q can make EPS progress of 50% despite them, when one considers the future potential.
I do wonder though whether when the crunch comes this division will be large enough to compete with the likes of LU,NT,MOT, as well as Nokia and Ericcson. Perhaps partnering would be the right thing to do. I suspect it would be a waste of a lot of this investment if the division were sold of just before some sort of 3G arrangement is made. And I can't believe we would get anywhwere near the 6$/share in stock price appreciation that breakeven would represent.
I'll say it again. THIS NUMBER IS ASTOUNDING! It's probably wrong. The nice thing about it though is that it gives us some idea of what could happen if things are really clicking,no manufacturing problems, higher ASIC volumes, higher royalty rates once GSM moves to CDMA. WOOOOOOOOOOWWWWWWWWWW!
Unfortunately though, it makes me more concerned than ever about the liklihood of a hostile takeover. I'd be sorely dissappointed if a severely undervalued Q were folded into an overpriced 50 bil+ company.
DMG |
