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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: idler who wrote (109)	7/24/1999 12:28:00 AM
From: Michael	Respond to of 13582

No Brain Cancer Tie To Mobile Phones - U.S. Expert DUBLIN (Reuters) - A U.S. radiation expert said Friday that extensive studies had shown there was no evidence of a link between mobile phone use and brain cancer, but that there were always more studies to be done. dailynews.yahoo.com

To: idler who wrote (109)	7/24/1999 12:26:00 PM
From: slacker711	Read Replies (2) \| Respond to of 13582

does anyone care to do a point-by-point response to the H&Q analysis? I have read that H&Q "has it in" for Q - for whatever reason - but I would like to see a response to the following points: (1) does Motorola really get "priority" with component vendors? (2) does H&Q have any real basis for asserting that Q will continue to lose share in the handset market? (3) is demand for ASICs really far below supply as H&Q asserts? (4) is phone production really "excess" resulting in ASP erosion? (when I can't seem to find a Thin-Phone anywhere, at least yet?) (5) what did they mean by saying Q "posted a sequential increase in royalty payments of just 13%" and using that for evidence of ASP erosion in the selling price for ASICs? (6) Is their estimate of "downward pressure on Q's royalty revenues" at all reasonable? (7) the 16% estimated long-term EPS growth rate seems way lower than anything else I've ever seen -- is this credible? (8) the ultimate valuation -- $82 - $102 range -- looks ridiculously low, based on a multiple of 38 x their FY 2000 estimate of $2.70 per share. In short, is H&G out of its mind or worth taking seriously? I would appreciate your comments. -- Idler. I was really hoping someone else would try to answer these questions....but you are stuck with me <g>. FWIW, here are my opinions. 1) I think that it likely that MOT does get some priority simply based on the fact that they are a larger company and produce more handsets in total. I dont know how Sony's participation effect's this, but it is probably generally true. 2) The Q will lose market share but, as engineer pointed out, 10% of a larger market can be better than 50% of a smaller one. It was bound to happen. The Q really hasnt increased phone production since last year while the total market has probably at least doubled. I really hope to see this fixed over the next six months or so. 3) As more non-Q ASIC users (NOK and MOT) ramp up CDMAone handset production, the Q is also likely to lose ASIC marketshare. I think that the news on Ericsson is pretty big (maybe others already assumed this). Now if they can just get Nokia.... 4) I thought I had heard that ASP erosion was going according "to plan" on the conference call..... 5) Since the ASIC and handset sales dont go hand in hand (11m ASIC sales this q does not mean 11m handset sales this q) I dont think you can make this assumption. I dont really know how much handset sales trail the shipment of the ASIC's...... 6) NO....Royalty revenue is only likely to go up as more and more manufacturers bring out handsets that compete not only with each other but more importantly with GSM and TDMA offerings. There should be no reason to buy an ATT phone by this time next year. PCS will be cheaper and will have phones that are competitive on weight and standby and destroy ATT in data. 7) I dont think so....It really seemed like that the Q's management endorsed at least a run-rate of .86 cents for the next 4 quarters. 8) H&Q seems to have taken every obvious fact about the Q and blown it out of proportion. No one doubts that the Q wont have 90% ASIC market share forever (it is the nature of competition) but since they offer the best, most proven, solution they should still hold a commanding lead in a market that is exploding. They also offer probably one of the best phones (Thinphone) out on the market today. I cant wait until PCS gets the Thinphone out, and allows me to access a My Yahoo page. This will be HUGE. I can tailor that page for stock quotes, sports scores, news items, movie times and a ton of other info....I would really recommend people trying out Yahoo's service just to see what the Thinphone will be able to offer. By next year they should also have web surfing up to 64kbps. In other words, no way is H&Q even in the right ballpark with their estimates. Slacker

To: idler who wrote (109)	7/24/1999 12:37:00 PM
From: KyrosL	Read Replies (2) \| Respond to of 13582

Here are my opinions on the H&Q report. I am relatively new to Q and mobile comm (I became aware of Q last March), so don't take these too seriously. >>(1) does Motorola really get "priority" with component vendors? Probably yes. It buys in much larger quantities than Q. >>(2) does H&Q have any real basis for asserting that Q will continue to lose share in the handset market? Don't know. But the $1.07billion Q got from its offering could allow it to beef up its manufacturing capability and finance inventory. >>(3) is demand for ASICs really far below supply as H&Q asserts? Don't know. >>(4) is phone production really "excess" resulting in ASP erosion? (when I can't seem to find a Thin-Phone anywhere, at least yet?) Probably not. ASP (Average Selling Price) erosion occurs primarily because of manufacturing efficiencies and vendor competition; in high tech industries it is almost independent of final demand. ASP erosion is not necessarily a bad thing. In fact in markets that experience explosive growth, ASP erosion may be a great thing. For example, the top PC companies thrived under pretty severe ASP erosion. The H&Q analyst evidently is not aware of the concept of demand elasticity. >>(5) what did they mean by saying Q "posted a sequential increase in royalty payments of just 13%" and using that for evidence of ASP erosion in the selling price for ASICs? 13% increase in royalties relative to previous quarter. This projects to 63% increase year to year. I don't understand why the report uses the word "only" to describe this. Since royalties are paid as a fixed percent of revenue and since the number of units increased at a rate greater than 13%, the average price per handset must have dropped. But as I have pointed out, a 63% year over year royalty increase is not low, and ASP price erosion may be a good rather than a bad thing (see 4). >>(6) Is their estimate of "downward pressure on Q's royalty revenues" at all reasonable? No. See answers to 5 and 4 above. >>(7) the 16% estimated long-term EPS growth rate seems way lower than anything else I've ever seen -- is this credible? Probably not. But under worst case conditions it could happen: Globastar goes down the drain, Q fails to improve its handset manufacturing efficiencies, China fails to materialize as a significant market, etc. >>(8) the ultimate valuation -- $82 - $102 range -- looks ridiculously low, based on a multiple of 38 x their FY 2000 estimate of $2.70 per share. In short, is H&G out of its mind or worth taking seriously? It is ridiculously low. But under worst case conditions (see 7) it could happen.

To: idler who wrote (109)	7/24/1999 5:42:00 PM
From: Randall Knight	Respond to of 13582

does anyone care to do a point-by-point response to the H&Q analysis? I'll respond to only one item. From there you can get an idea about how accurate the rest of the report must be. H&Q estimates FY2000 earnings at $2.70. In the conference call, management made it VERY clear that $.86 was the number for this quarter and that all estimates for next quarter, let alone next year should be based on that as a starting point. Let's assume that there is no growth in earnings for the coming year. If you multiply .86 times four you get $3.44. That is fully $.74/share above H&Q estimate. Is there anyone here who knows anything about the Q that thinks growth in earnings is going to be FLAT!? The H&Q analysis is a joke. They have obviously estimated Qualcomm's business segments to justify low-balling the Q. I'm not sure why. FWIW, my estimates for FY2000 start at $5.00/share.

To: idler who wrote (109)	7/24/1999 10:28:00 PM
From: cfoe	Respond to of 13582

RE: H&Q research report - Here is my shot at an analysis. I read the H&Q report and compared it to the Lehman Bros. (pre-earnings report) analysis and here are my questions, thoughts, etc.? Comments follow the order of HQ report. Revenues: HQ makes a lot of “lighter than expected revenues.” Question – why was their revenue forecast nearly 13% higher than LB's ($1,054 vs. $935)? Is “shortfall” a function of Q's performance or poor forecasting by HQ? How could HQ have gotten to a so much higher forecast? Here's one way: start with consensus EPS because one can not afford to be outside the consensus, use past margins because we know Q cannot improve in this area; which means revenues need to be higher. Hmmm. EPS for 99 4th qtr and 2000: Q's CFO said that analysts can use proforma earnings of $.86 for 3rd qtr as the new base going forward. If I read HQ correctly they are forecasting less EPS in the 4th qtr '99 and a decline in EPS from this proforma base of 7% in 1st qtr 2000 increasing to 28% in 4th qtr. So to base our actions on HQ forecast, we would have to assume that Q's CFO made a completely bogus statement to the analysts last week. I for one find this hard to believe; especially in light of the fact that he must already have a very good feel as to how the first half (at least) of the current quarter is looking. Am I misreadnig something here? Market cap: I multiplied HQ's number of shares by Friday's closing price (154 11/16) on Yahoo and get about $6 billion less in market cap than HQ's report shows. The price differential of about $4/share only accounts for less than $800 million in difference. The newly issued 6 million shares (if in HQ's no. and not Yahoo's) would only account for about one billion dollars. So I am still missing about $4 billion in market cap. Am I missing something else or are HQ's numbers suspect? Demand vs. supply: Every other report I have seen, including a recent report on 1st quarter cell phone sales, indicates that cell phone demand is strong and growing. HQ mentions the parts shortages all manufacturers are reporting. Doesn't all this indicate that cell phones are in the “tornado” stage; that what we have is hyper-growth and not slowing demand? MOT vs. QCOM unit volume sales: Same report on first qtr cell phone sales that I mentioned above said that QCOM had moved past ERICY into second place in cell phone sales in US. Did I read this wrong? Is HQ talking about worldwide? Can someone who has more knowledge help me with this? Excess supply (again): With Japan, Brazil and growth in US market, I cannot see how HQ could say demand will be slowing. This seems to fly in the face of all other reports. Unit sales growth vs. growth in royalties: HQ makes what seems to be a valid point about slipping prices. However, other analysts have also said this (as has Q's management), but see volume growth more than offsetting this. We will see who is correct. Analysis of 3Q financial results: Only cause for concern (if I am reading the columns correctly) is growth in G&A over last year. S&M declined, which can be more efficiency, less need to market given hyper-growth, or a shift in priorities. R&D still healthy, but only a small increase. Yet increase in G&A is substantial? As former CFO, this at least raises questions for me. Can anyone comment?