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

To: Voltaire who wrote (67492)	2/18/2000 5:43:00 PM
From: Ruffian	Respond to of 152472

Prudential article on QCOM/China QCOM: More Color Provided on China - Chinese licensees to purchase QUALCOMM's MSM3000 (IS95) and CSM chips - Looking for new opportunities for CDMA licensing and significant contracts - CDMA may get a boost from infrastructure providers through vendor financing - China adding growth of CDMA in Asia Pacific, which has the largest CDMA subscribers base - China could be the first predominant IS95c network, potentially upgrading from IS95 directly to IS95c - Reiterate our STRONG BUY rating on QCOM QUALCOMM's Analyst meeting held on February 17th gave us more color into the China Unicom Agreement. Chinese licensees have stated they will purchase QUALCOMM's MSM3000 (IS95) and CSM chips. The agreement with China allows access to a potentially huge market, which would more than double the addressable CDMA market. We believe that China would significantly add to the growth of CDMA in Asia Pacific, which already has the largest CDMA subscriber base to date. We believe that the near term catalyst coming out of China would come from potential new opportunities for licensing of CDMA from other manufacturers or Designated Chinese Entities (DCEs). We also believe that CDMA may get a boost from other CDMA infrastructure providers looking to enter into the China CDMA market. Furthermore, we are also looking for significant contracts coming out of China. We have increased our EPS estimate to take into account the handset division sale and the impact of China with a fiscal 2000 EPS of $1.11 and a fiscal 2001 EPS of $1.63. Beyond fiscal 2001, we believe there is potential for tremendous subscriber acceleration. Accordingly, we reiterate our STRONG BUY rating on QCOM. Chinese licensees to purchase QUALCOMM's MSM and CSM chips. We expect China to purchase QUALCOMM's MSM 3000 (IS95) and CSM chips. From IS95, we believe that China would migrate their CDMA networks to IS95c using the MSM 5000 chipsets, leaping over the IS95b chipsets. We believe that China could be the first predominant IS95c network in 2001 (with over 50% of the network). Potential new opportunities for licensing of CDMA and significant contracts. QUALCOMM' s agreement with China also includes a framework for licensing QUALCOMM's patents to Designated Chinese Entities (DCEs). This provides opportunities for QUALCOMM to license its CDMA technology to companies bidding for Unicom contracts. Under the framework agreement, DCEs will purchase their CDMA chipset requirement from QUALCOMM as long as it does not cause any material competitive advantage to the DCEs. The DCEs should also pay lower than standard royalty rates for sales in China and greater than or equal to standard royalty rates for sales outside China. When the DCEs begin to sell outside of China, the DCEs should pay standard up-front fees to QUALCOMM for non-domestic licenses. CDMA may get a boost from infrastructure providers through vendor financing. China Unicom plans to roll out its CDMA networks ahead of its public listing, which we believe is scheduled for Spring of 2000. We expect to see CDMA infrastructure providers such as Nortel Networks and Lucent Technologies, move ahead of China Unicom's financing plans by providing vendor financing. We believe that this boost would further accelerate the CDMA adoption in China. China to top off growth in Asia Pacific, which has the largest CDMA subscribers base. We believe that China would top off the growth in Asia Pacific, which has the largest CDMA subscriber base to date. As of December 1999, the Asia Pacific region had 28 million CDMA subscribers or 56% of total CDMA subscriber worldwide. At the end of 1999, there were over 43 million total mobile subscribers in China, whereby 6 million were analog subscribers and 37 million were GSM subscribers. That penetration rate in China has been low compared to other regions, at about 3%. China Unicom plans to deploy nationwide cdmaOne network with capacity for 10 million subscribers in 2000. Total mobile subscribers is expected to be over 68 million in 2000 and over 130 million by 2003. As the fastest-growing wireless communications technology, we expect CDMA to gain a significant proportion of the China market.