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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: LindyBill who wrote (34155)	7/7/1999 9:19:00 AM
From: Clarksterh	Read Replies (2) \| Respond to of 152472

Bill - It is much cleaner, and more profitable, to be out of the handset business, IMO. Cleaner, perhaps. More profitable, definitely not. By my guess 25% or so of Qualcomm's EPS comes from handsets, and much higher for revenues. And given that they already have 90% of the ASIC business, even if they were to get all of the remaining 10% it would not make up for the lost handset sales. Some simple calculations on earnings: 1) Qualcomm makes a phone and sells it - assuming their net margins soon reach 13% (which I think is completely reasonable this year) and the average wholesale price is $250. That is $32.50 earnings. 2) Qualcomm sells the ASIC for $30 with a net margin of 30% (opimistic) and collects royalties of 4% on $250 phone with a net margin of 60%. Qualcomm makes $15 of earnings per phone. Qualcomm might sell the handset division for long term strategic reasons, but earnings will definitely not go up, and I personally would actually value the company less. I, and many other investors, prefer dollars of earnings now, to perhaps somewhat more (assuming handsets would have caved in the next 2 years) potential earnings later. My personal opinion is that if there is any truth to the Siemans(sp?) rumors, it lies in some sort of joint venture, possibly as a replacement of Sony. JMO Clark PS I am ignoring the 'internal profit' from ASICs and royalties when Qualcomm sells a phone. I suspect that they are somewhat lower than is charges outside companies, but the point of my example was that even if these internal profits are non-existent (i.e. Qualcomm sells ASICs to its handset division at cost) they still probably make more money on a phone than when someone else sells the phone and they just sell the ASIC and collect royalties.