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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: voop who wrote (23254)	4/22/2000 3:29:00 PM
From: gdichaz	Read Replies (2) \| Respond to of 54805

Voop: Qualcomm revenue estimates from the Rich Janitor: From the Rich Janitor: The growth rate of CDMA is phenominal to say the least. Sticking with only the current cdmaOne and cdma2000 path is a goldmine for QCOM and will allow QCOM to continue its earnings growth by 50%+ a year for the next 5 years. Remember that? It was simple. As long as Q grows by 50%+ a year, we wre golden. The percentage was actually conservative. CDMA growth is expected to be larger and with the addition of replacement pohones that Nokia suggests equals 40% of existing subscribers per year, Q's actual growth could be as high as 80-100% per year for the next 5 years. Does this include WCDMA and or China? Absolutely not! Some facts that pertain ONLY to our current factual path: 1. In FY99, QCOM reported earnings of .60/share (adjusted for split). After 2 quarters, we have earned .52/share with 2 of our strongest quarters left to go. 2. From calander perspective, at the end of 1999 there were 50M CDMA subs. After Q1, there were ca 58M subs. Conservative estimates place CDMA subs at end of 2000 at 85M +. This does not include China. Now, remember Nokia's replacement phone percentage of 40%/year? 3. ALL existing cdmaOne networks are currently being upgraded to cdma2000 networks meaning that any WCDMA developments will have NO negative effect on current cdmaOne/cdma2000 growth rates. 4. Competition. What a joke. What don't the analyst understand here. This isn't plantlife. If you are years late shipping a product that the competitor (QCOM) had years ago, then chances are that the new products the the competitor is shipping is light years ahead of the old product you have yet to ship. We are now deep into April and the chip competition is still discussed? QCOM is shipping their 3100 MSMs and all the competitors mention have yet to ship products equivalent to the MSM2300 (2 generations or 2 years ago). Where are the volume shipments? Can someone name one customer that does volumes over 50K units outside of Nokia that is not using QCOM chips? I guess MOT uses their own chips although a majority of their phones use Q MSMs. Not one!! Not even a small guy. And don't show me any damn press announcements. You have to be able to open the phone or device up and see a physical chip. So now, when and if the competition ever comes out with a working chip, it will be priced and performance compatiable with a chip that QCOM doesn't even ship anymore. Yeah, reason to worry. So understanding these FACTS and understanding that none of the above includes WCDMA, China, NOK buying chips, India, Europe, AT&T or any other rumor that people choose to make a big deal ot of, explain to me why QCOM is so cheap. 'continued' Part two from Rich: Yes, cheap. We agree that our growth rate on the facts alone is greater than 50% a year for several years to come and more. Using Year 2000 EPS, our P/E is under 100. CSCO is allowed to trade at a 140 P/E with only 30% growth a year. Cisco has earnings of 3x more than QCOM, yet a market cap 6x more than QCOM. Additionally, QCOM earnings are growing at a much faster pace than CSCO earnings were two years ago. So how do you value QCOM? Compared to CSCO and other high flyers, QCOM is cheap at current multiples. ESPECIALLY considering their sustainable high EPS growth rate. Well, even QCOM's biggest adversaries iun the finicial world admit that QCOM will earn $1B in royalties in 2001. Conservative estimates also predict 100M ASICs in 2001. This means that QCOM will earn between $2.2 - 2.5B in 2001. So, if our 2001 P/E is < 50 and our growth rate is 50%/year, what should today's value reflect? Easy: With 50% sustainable growth per year, you have to use a fwd year P/E of 100+. 4/2000 = $145/shr 1/2001 = $250/shr 1/2002 = $425/shr Now the question of added value comes into play. Considering the following scenarios, what added value, in terms of percentage gain, does each contribute to QCOM's stock price: 1. China 2. Q selling WCDMA chipset 3. Q recieves royalty for WCDMA phones made (we already know this is fact, but don't know exact amount. 4. Nokia buys MSMs or licenses MSM core technology. 5. AT&T invests in a CDMA network 6. More countries deploy CDMA networks 7. Today's wired devices go wireless (internet, etc.) My point is that QCOM has a value based on typical CDMA growth. This is a very low risk earnings path that today is undervalued. It has a different value based on all the potential positive changes that can effect its revenue, earnings, and market share in the future. Either way, you would be hardpressed to find investment opportunities with so little risk and so much upside. All JMO, - TRJ