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

To: marginmike who wrote (41486)	9/16/1999 3:34:00 PM
From: Ruffian	Read Replies (1) \| Respond to of 152472

Thursday September 16, 3:16 pm Eastern Time Merrill Lynch now foresees November U.S. rate hike NEW YORK, Sept 16 (Reuters) - Merrill Lynch & Co. said on Thursday it now expects the Federal Reserve to raise interest rates in November, from its prior forecast of only a possible rate increase. ''We always had nothing in October and we continue to stick to that, but we did not call for one in November. Now we are saying there will be a 25 basis point rate hike in November,'' Merrill Lynch senior economist Mary Dennis told Reuters. Merrill and other firms had been reluctant to forecast a rate hike in November because of potential Y2K liquidity problems late in the year. But last week, the Fed announced measures to ensure there would be enough liquidity in the system heading into the year end. ''The only thing that was holding us back was the Y2K liquidity problem, but the (new measures) definitely give (the Fed) more flexibility,'' Dennis said. She said another Fed rate hike was warranted due to continued strong economic growth and rising input prices. Merrill forecasts gross domestic product (GDP) will grow 5 percent in the third quarter and 3.5 percent in the fourth quarter. The Fed lifted the federal funds rate by 1/4 point in June and again in August. The Fed next meets on October 5 and then on November 16.

To: marginmike who wrote (41486)	9/16/1999 3:36:00 PM
From: 16yearcycle	Respond to of 152472

I was afraid you'd bring that up... But we are still looking at 6.15 now vs. 10 then, so we have stocks that are fundamentally cheaper, by a lot, vs. bond yields. We also now know for sure that the Fed does look at these variables in their model. Their model shows we are overvalued by 35% now but as I recall, it was 60% then. So we will only drop 35% ;<(

To: marginmike who wrote (41486)	9/16/1999 3:45:00 PM
From: Ruffian	Respond to of 152472

Exellent Post> Grow by selling... by: Explorer_at_large (36/M/Southwest) 37923 of 37957 the answer is actually pretty simple. Qualcomm's handset business is currently only modestly profitable, let's assume 2% to 3% margins on roughly $2 billion in revenue. Now let's assume the business is sold to a company that (a) must pay royalties and (b) is contractually bound to buy Qualcomm ASICs. Let's use a low-end 3.5% royalty rate, a $25 chip selling price, and (minimum) 30% operating margin for the ASIC operation. Let's assume that the new operator only holds revenue flat. He would pay Qualcomm roughly $70 million in royalties (3.5% of $2 billion) and buy $50 million worth of ASICs that generate an additional $15 million in operating profit. All else being equal then, Qualcomm would (a) have eliminated its capital intensive handset operation, (b) been paid some amount of net proceeds and (c) now be earning approximately $85 million on the business versus $30 to $50 million. Perhaps more significantly, Wall Street will most likely pay more for royalty/ASIC income than it will for royalty/ASIC/handset income because the latter, i.e. handsets, are considered a volatile (and rather unpredictible) commodity. NEVER...NEVER...NEVER underestimate the value creation power of brilliant management. EAL