Ramsey, All *projections*
Jim Frost, Clark, sharpen your pencils and see some projections
Sorry, Ramsey, I don't really try to make any kind of near-term (say, 1 year or less) earnings or revenue projections. If the Wall St. boys can't get it right with their seven figure salaries, staff of helpers, and access to storebought data, I just never figured to have much of an edge in that game. Gregg and Clark are most thorough, however, so they may have some insight.
For me, the terrific quarterly results are confirmation of my original back of the envelope musings that I have posted here many times before. ie. In a few short years Q should be doing something like 10 billion in sales; with a highly proprietary position they should be able to achieve 10% after-tax net margins; that implies $1 billion net or $13.33 EPS; take your pick of timeframe or ending multiple; The end result is a very big number relative to the current stock price.
Note that this quarter's proforma revenue was $908MM and proforma net was $98MM, for a net margin of 10.8%. I now think a 10% margin is going to prove low when we get to $10B sales and maybe 15% is achievable. So that EPS figure could get to $20. Now, this leaves out a whole lot of details like the ones Gregg mentioned in his post about 400 or so messages back. Still, when I think about the probability that Irwin and his team get us to this level I am quite sanguine. Although I fully expect Q to remain a powerhouse in ASICs and handsets, I also take a lot of comfort in that royalty line. I like to use the old $15 per new sub figure that was discussed at length here way, way back. Using a guess of 20-25 million new subs worldwide in calendar 99, 30 to 40 million new subs in 00, and 50 to 60 million in 01, you get Q royalty progression of $337MM, $525MM, and $825MM. That alone gets you to $11/share pre-tax, $7.15 after-tax, just for royalties.
Based on the above, with Q under $500 I don't feel pressed to get a whole lot more detailed than that. The hard part, in my opinion, is figuring out what the real upside is for Q's earning power 3 to 5 years forward. My suspicion is it could be much, much bigger than most are expecting.
Sorry I can't be more helpful.
Best regards,
Jim
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