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

To: cfoe who wrote (3097)	11/9/1999 12:30:00 PM
From: slacker711	Read Replies (2) \| Respond to of 13582

I cant remember if this was posted.....H&Q report from after earnings. I know that everyone disagrees with this guy but you have to at least consider his basic argument of an oversupply of ASIC's. H & Q report by: sweetmoney33 11/9/1999 11:56 am EST Msg: 50869 of 50887 This report was issued on 11/4 and is available on Schwab.com The following is found on this board posted several days ago. I think it is from that report because the words are exactly the same. You need to have an account of Schwab to see the report there. 1. This quarter's upside was due in most part to significant improvements in operating expenses. However, expenses will likely go up as a percent of revenue as the company is currently spending more (in percent terms) in R&D on ASICs than on handsets. We estimate handset R&D runs at about 4% of revenue while ASIC R&D is much higher. 2. Book-to-Bill declined for third quarter in a row and is expected to be flat in Q1. The company is forecasting an increase in unit volumes but flat revenue and book-to-bill for ASICs next quarter. The company's guidance of flat ASIC revenue on modestly higher unit shipments for next quarter suggest unit and revenue growth is slowing. Forecasts of a flat book-to-bill for next quarter also implies a slowdown as we move into 2000. 3. Competitive pressure from Motorola and DSP/Intel (DSP: $34.8125), increases. 3. CDMAOne ASIC supply appears to have out-run demand for handsets. Sprint's enormous subscriber growth and Korea's rebound caused a temporary shortage in handsets earlier this year. This was manifest in higher pricing, stronger demand and record growth in orders for chips and phones. Whereas the replacement market rate for CDMAOne phones for 1998 was about 20%, the spot rate in early 1999 actually declined to near zero. This under-capacity resulted in record demand, visibility and growth for CDMAOne handsets and chipsets. In the ensuing scramble to obtain product we believe OEM's have over-ordered to ensure supply and the company has ramped production to meet this excess demand. The strongest indication of this is the significant discrepancy between handset supply as measured by chip sales and handset demand as measured by subscriber growth. 5. Handset supply is comprised of four elements: (1) phones manufactured using Qualcomm's chipset; (2) those produced using DSP's chipset; (3) Nokia's phones(which use Nokia's own chipset); and (4) that portion of Motorola's CDMAOne handset production that uses Motorola's own chipset (versus that which uses Qualcomm's). With a three to four month delay between the time the Qualcomm's ASICs ship and the corresponding phone sale, quarterly ASIC sales must be deconstructed in order to approximate industry capacity. 6. Large mismatch between supply and demand suggests a steep decline in handset ASP and the same effect will now flow through to ASIC and royalty growth. It will also lead to pressure on ASIC pricing and a slowing in royalty growth which tracks handset ASPs. Moves in CDMAOne ASICs by Motorola and DSP/Intel could greatly exacerbate this effect. 7. The company will likely face difficult as the year progress and the new competitive environment materializes. At $260 1/2 , the stock is trading at 88 times FY2000 estimate of $2.95 which is a large premium to its 22% EPS growth rate. The stock is fully valued at these levels especially considering the difficult competitive environment the company is facing in chips, the liability of the handset business and what looks to be a significant over-supply in CDMAOne ASICs.

To: cfoe who wrote (3097)	11/9/1999 1:21:00 PM
From: Kayaker	Read Replies (2) \| Respond to of 13582

HDR sounds great, but is the bandwidth required for widespread use of HDR going to available (as qdog asked)? Will operators have to give up some voice capacity to implement HDR? How will that be possible given the growth requirements of voice alone? Also, the following from a Nortel exec: "Lots of operators have their spectrums completely full. If they deploy HDR they ... lose capacity to carry voice, which pays the bills," said Dave Marchigi, vice president of marketing at Nortel Networks. Nortel currently supports a different standard, 1xrtt, which would provide slower data rates but allows the mingling of voice and data. "Until the demand for data traffic is really there, (HDR) is a tough business argument." msnbc.com