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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 168.09

+1.8%

Nov 28 9:30 AM EST

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To: bananawind who wrote (29901)	5/12/1999 9:10:00 PM
From: Clarksterh	Read Replies (1) of 152472

Jim - We know they have about a 90% market share in chipsets, so guess 5.5 new subs for 1Q99. Low and behold CDG informs us that was exactly the number. New subs and phones sold shouldn't be the same. I don't know what percentage of phones sold are replacements, but I suspect it is easily 25%, thus the total new phones sold last Q would have been at least 7.3M assuming new subs were 5.5M. Worldwide subscriber growth seems to be nicely tracking Q's quarterly MSM shipments on a one quarter lag basis. I think that the lag is less than 1 quarter. After all, if the lag were 1Q then the royalties this last quarter would have been the same as the previous quarter since in the quarter ending 9/30/98 they shipped the same number of MSM's as in the Q ending 12/31/98 and yet the royalties ballooned 1 quarter later. I suspect the delay is more like 1/2 of a quarter. Thus I would have expected royalties on (2.5M MSMs (1/2 of 12/31 Q) + 4.5M MSMs (1/2 of 3/31 Q))/0.9 (MSM market share) = 7.7M handsets sold in Q ending 3/31 as compared to 5.5M in previous Q. This is in contrast to the royalties which went from $45M to $77M in the same time. This is closer to the same percentage increase (77/45 ~= 77/55) which lends credence to the hypothetical 1/2 of a quarter delay. In addition we get a more reasonable royalty rate of about $10 per handset which at $220 per handset is about 4-5% and more what I would expect (Note that as more of the sales become non Korean, we get higher royalties since we owe a large chunk of Korean PCS royalties to ETRI). This means, in turn, that much of the jump in ASIC sales last quarter was seen in royalties last quarter. If we assume ASIC sales next quarter of 12M (1/2 or the BtB) and 90% market share then this implies about $120M in royalties next quarter. As for Qualcomm handset sales, it sounds like they are really boosting capacity. In April they were already exceding their previous quarter average rate by >20%. Thus I would guess handset revenues are likely to go up 30% for the quarter. Altogether I'd be surprised at less than $0.75 pro forma EPS next quarter. Clark PS It should be noted that all of these numbers should be treated with suspicion, but that even with some pretty conservative assumptions Qualcomm is likely to see a pretty big sequential improvement next quarter.

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