Dave,
I'm sure you thought of this but wouldn't the lack of infrastructure sales and the reduction in handset prices account for the slow rev growth?
Yup, I did think of those items.
1) Infrastructure was not particularly good in the year ago quarter. See the quote below from the year ago quarter press release. And in the year ago quarter we got creamed primarily due to the ASIC hit in Korea and the rework problem in Qualcomm phones. Thus I would expect a large bounce up in those areas compared to a year ago. I guess it is possible that infras sales this last quarter was so bad it offset the bounceback, but, given the poor performance one year ago it would have to be truly hideous this year and perhaps even go to negative revenues<g>.
. The increase in communications systems revenues for the second quarter of fiscal 1998 compared to the year ago quarter was primarily attributed to increased sales of Code Division Multiple Access (CDMA) subscriber equipment; increased sales of Application Specific Integrated Circuits (ASICs); and increased revenues from international OmniTRACS system sales and messaging. Revenues from infrastructure equipment increased from the first fiscal quarter to the second fiscal quarter, although revenues were lower as compared to the year ago quarter when a substantial portion of a major infrastructure contract was recognized.
As for ASIC and handset sales prices falling very rapidly, I think the only area with abnormally large decreases in handset prices was Korea (?deregulation), and Qualcomm doesn't sell many handsets into that market (remember also that Qualcomm has only talked about such pricing pressure in its effects on royalties which makes sense if the only area of fast falling is Korea where Qualcomm doesn't sell many handsets). Also if prices were severely pressured I would expect it to show up in the gross margins, but gross margins are actually doing very well.
My guess is that the reason that revenues didn't grow much last quarter is due to a combination of factors: 1) Phones and ASICs have only this year become more than 50% of comm revenues (i.e. dilution of growth), 2) Infras fell somewhat due to no G* and some drop off in other orders, 3) Omnitracks has maxed revenues.
Just as a 'for instance' last year perhaps revenues were:
$240M phones (800K(?) phones one year ago at $300(?) apiece)
$60M ASICs (3M(?) ASICs at $20(?) apiece)
$100M infras (WAG G* gateway and misc other infras)
$226M Omnitracks (Complete WAG to get to $620M total)
$626M total
And this year:
$383M phones (1.7M phones at $225(?) - assuming 25% price decline)
$135M ASICs (9M ASICs at $15(?) apiece)
$50M infras (No G* gateway this Q, some falloff in other orders?)
$226M Omnitracks (Assume no growth)
$794M total
This is close, but not perfect and it has a lot of unknowns. It would be really nice to know a little more like if Omnitracks has effectively stopped growing (I think it probably has come close to maxing out, but it is a guess.)
Thanks for the feedback.
Clark
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