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

To: Boplicity who wrote (62493)	1/16/2000 12:22:00 AM
From: Ruffian	Read Replies (1) \| Respond to of 152472

This might help, it was posted by Rich tonite> It's TRJ, the crazy guy who is not as optimistic as Volts, yet always bullish on the Q. Some real good earlier posts that questioned Q's valuations appeared earlier and I wish that I kept all my models from earlier posts bookmarked. On the other hand, perhaps it is good to start fresh every few months. Unfortunately, I do not have my dataquest numbers at home with me, so I will have to make a few assumptions, but I will try and be very conservative. So the story goes: How to do you place a valuation on a company that is predicted to grow it's yearly EPS by 50% a year for the next five years? Even harder is to try and valuate the same company when it continues to blow those 50% projections out of the water. As much as I would love to speculate about HDR, China and WCDMA, the truth of the matter is that all that 'is' speculation. Although I buy speculative stocks, I would not invest 30% of my portfolio in them. When I first bought Q it was speculative and 1% of my portfolio. As I figured out its' earning path, it went from speculative to medium risk in a short time. As did the increase in my position. So, for today, let's focus on what is real. what is in the cards for Q over the next three years? I am using three years because I don't see any 3G alternatives before then. Thus, we can draw concrete conclusions over that period of time. So here are the factors that contribute to Q's value. 1. P/E I won't do it here, but I can debate with anyone that a company that exceeds EPS growth of 50% a year for the next three years deserves a P/E of 100+. IF you disagree, let's debate P/Es in a separate post. IMO, as long as Q grows EPS by 12-20% per quarter, there is no P/E that is too high. 2. CDMA growth Typically, I would include earnings after P/E, but because Q's earnings have mirrored (actually exceeded) CDMA subscriber growth, I feel it is logical to include this one before we discuss earnings. In December of 1998, all the major communications analysts called for CDMA to grow by 35-50% for the next 5 years. Well, as we know. They were a bit conservative. They underestimated two things. The first and most important was the growth of wireless. The second was QCOM's ability to sell and grow worldwide CDMA acceptance. In December of 98, there were a total of 23M worldwide CDMA subs - an increase from 8M the year before. In Q3 (jul-sept) of this year, 7.5M subs were added. A staggering increase of 22% over the previous quarter. This put total subscribers at 42M. Almost double from the year before with still our best quarter in fromnt of us. The pros had called for about 35M by end of 1999 and it look as if we will finish closer to 48-50M. Expect a slowdown? Not at all. A 50% increase in the year 2000 would represent an end of the year number of 75M subs or 25M new subs in 2000. Need 112M in 2001 and 160M at end of the year 2002. 2001 represents the commercial launch of IXRTT (2.5G) in Korea and North America which increase CDMA equipment sales significantly, although I will not speculate on how this will increase sub growth. Not because I don't think it will (IT WILL), but because I would like to continue focusing on the conservative. So, keep track of the CDMA growth numbers. They have always been the key. Why? Two reasons: 1. Because QCOM is paid an ASIC royally and a phone royalty on every CDMA phone sold, their EPS growth can conservatively be drawn in parallel 2. The biggy. CDMA subscriber growth is the key, but CDMA replacement phones are the reason that you have a goldmine in your portfolio. As the total number of subscriber 'base' grows, the number of replacement phones tell a new story. QCOM owns the CDMA ASIC world. In a WORST case scenario, QCOM may have only 50% of the CDMA ASIC market. Although I think that 70-85% is a more realistic worst case scenario, I want to be very clear. 50% of the market will allow QCOM to continue EPS growth 'well' above 50% a year. But we don't have to worry about losing ASIC share. Why? Simple - QCOM just announced successful trials of their 1XRTT chip and software. To date, MOT, Samsung, DSPC, LSI or Nokia have not been able to develop a chip that is half as competitive as the MSM. In fact, half of those companies don't even have chips in high volume manufacturing. With the exception of MOT and NOK who have jokes for ASICs, everyone else is stillwaiting for HV. So as they finish up their inferior chips that have higher cost and analog-like performance, QCOM is sampling a product (1XRTT) that represents a two year development headstart on a CDMAOne chip. To be continued....

To: Boplicity who wrote (62493)	1/16/2000 1:13:00 AM
From: Ruffian	Read Replies (3) \| Respond to of 152472

Rich, Cont.... 3. Earnings It is all in the earnings! Now that we have a model, a pattern if you will, of CDMA growth, we can determine QCOM's part of that growth and how it relates to their growth. An equation for this could be E= S + R E= Yearly EPS Growth S= subscriber growth in percentage R= replacement phones (30% of total subscribers) Thus in 1999 E=1.0 + .3 E=130% And in 2000 a conservative view is: E= .5+ .3 E= 80% Using this to determine actual growth variables, one could use the equation T = A + (E)A T = total phones sold in the year A = new subscribers in the year and E = EPS growth You can see how the base subscriber rate acts as a huge growth multiplier for replacement phones. You math majors could perhaps think of a better equation with actual variables, but this is the best I can do with my janitorial-like mind and half a bottle of Chianti. But understand this: The more CDMA subscribers there are, the more replacement phones that will be sold. Easy enough so let's finish by doing the numbers and let's be as conservative as humanly possible. A worst case scenario. Q1 = .28 Q2 = .50 (I added a premium because HS division is gone) Q3 = .56 (12.5% growth) Q4 = .63 (12.5% growth) 2000 earnings = $1.97 so using a 100 forward PE, TODAY we should be at $197/share in a VERY conservative way If $3 ($12 pre) is 2001 earnings, we should be at $300 a share in December of this year. Remember these facts: A) I am only using subscriber growth in parallel to EPS growth. I DID NOT use the more accurate equation above B) I am not using a premium for HDR, China, WCDMA or Huge expected data growth So what if we use Janitor's numbers: Q1 = .28 Q2 = .50 Q3 = .60 (20%) Q4 = .72 (20%) Or earnings of 2.10 so $210/share today and 357/shr in December PLUS I would add FMV or $25/share for HDR, $25 per share FMV for China and $10/Share for WCDMA for a total of $417 at year end. I used less WCDMA because it is the furthest out there in terms of definitive analysis. Am I still being conservative? YES! What about other CDMA applications and other Q business units? $25 premiums are cheap for the like of what China would do to our growth rates. What about HDR and new licensing fees for IS-2000? What about new data users? Well, as I said at the beginning: Janitor doesn't want to speculate. I want a sure thing and right now QCOM is a sure double and likely triple based on CDMAOne growth and earnings alone. - Janitor

To: Boplicity who wrote (62493)	1/16/2000 11:04:00 AM
From: Jenne	Read Replies (2) \| Respond to of 152472

Summary Of Dropped Calls -------------------------------------------------------------------------------- QCOM $140.44 (-9.56) What can we say, QCOM is choosing it's path and its not the direction we want. Even with the Nasdaq's record breaking highs and good volume for QCOM, it closed down on Friday. QCOM is no longer following the Nasdaq. It's that new direction that has caused us to drop QCOM. It is still holding support at $140 and that is a good indicator, but we just don't see any life in QCOM. Their earnings are due the 25th (that is about 7 trading days)and if they were going to make a run based on those earnings, we would see some enthusiasm in traders. Besides, QCOM has never been a company based on the present, they are all about the future so earnings based on present numbers may not do much for them. optioninvestor

To: Boplicity who wrote (62493)	1/16/2000 3:02:00 PM
From: slacker711	Read Replies (1) \| Respond to of 152472

Do you feel, based on what you are currently seeing in the in the wireless sector, that QCOM can live on earnings along for the remainder of this year? I'm not asking if you will sell. I just wondering about the justification of the price at the current level based on the current climate in the wireless sector. I cant tell you if the stock is fully priced or not (PE's over 75 or so give me nose bleeds).....but I think that the direction of Qualcomm will be determined over the next four weeks or so. 1) The most obvious...earnings. We will get a new look at the company after the sale of the handset division. Also a general observation on the BTB ratio on ASIC's will be key. 2) The Unicom rollout....Everything I have read has indicated that Unicom will hand out contracts by the end of Jan. This would provide a pretty big upside to current estimates for 2000 but even more importantly for 2001. If Unicom doenst make somekind of an announcement then CDMA rollout in China is back in limbo. 3) I cant remember the name of the show....but there is a Wireless trade-show that takes place during the first two weeks of Feb. The handset manufacturers will give their first peeks at the phones they plan to release during the next year. Also Qualcomm will most likely announce the shipment of the MSM3100. If Nokia or MOT were going to switch to using Q's chips during this year the announcement would probably come at this show (doubtful). Also there will probably be a couple of alliances/JV's that could be announced. These are the things that I am basically looking for....much of the next year we will be waiting for the results of the announcements that come out in the next couple of weeks. JMO.... Slacker