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

To: waverider who wrote (71075)	4/22/2000 1:14:00 PM
From: waverider	Read Replies (1) \| Respond to of 152472

Continued: I would now like to summarize and consolidate some observations I made during the conference call and while going through the other sources of information. QWS (Omnitracks and Globalstar): The margin in this segment will be a sustainable mid thirtieth (35%) in the coming quarters {Q2 CC}. It has risen from 30% in Q1/00 to 44% in Q2/00 due to the already mentioned gateway profits. A sustainable rate of 35% sound excellent and will greatly contribute to the future bottom line results [G]. Omnitracks is growing greater than 20% YOY on volume but G* is kind of hazy (no definite targets here in the CC, only mentioned that they can supply handsets as the providers require). However, I believe in G* success [obviously G], at least in the long term. So QWS looks good. However, in my subsequent model for calculation of Q3 earnings, I will assume a flat revenue and profit to reflect the uncertainties of the earlier mentioned one time profit of 15M. QCT (Chip sets and R&D): The lower Q2/00 margin of QCT (32%) is attributable to the lower revenue, i.e. lower chipset sales (23% vs. Q1/00). This makes sense since R&D are assumed [G] to be constant or up while the revenue is lower. R&D is about 24-26% of revenue in Q2 {Q2 CC}, 90M {press release}. An increased revenue in Q3 should accordingly offset the R&D costs and result in higher margins in Q3. According to management {Q2/00 CC} a sustainable margin rate for QCT should be in the mid thirtieth (35% [G]). As we know, lower revenue is due to inventory balancing and parts shortages on side of handset manufacturers. However, I assume that also the transition to newer chipsets and therefore the unwillingness of handset manufacturers to buy technology that is being phased out (MSM2300) is part of the problem. According to management {Q2 CC} the transition to MSM3100 is in full swing, with MSM3000 being shipped in high volume and MSM3100 phones to be released in late April/ early May. The near term market share can be considered as being constant {Q2 CC} and I think 85% is a reasonable number [G] (I am not sure about this one, so please let me know if you out there can confirm). ASP is declining at a rate of 5% per quarter {Q2 CC} which I will happily include in my calculations below. According to I Jacobs, CSM (infrastructure chips) sales will do well over the next few quarters due to upgrade activities on provider side {Q2 CC}. The 1xMC chips will be shipped in volumes in the second half of 2000 {Q2 CC}. 1xMC will apparently be introduced in Korea during 2000, with the remaining providers following in 2001. Now here is some kind of contradiction I do not quite understand. I heard I Jacobs first saying that Korea and DDI/Japan will roll out in 2000, the remainder in 2001, whereas later on he states that he expects Japan to introduce 1xMC in the existing spectrum very probably before late 2001 {Q2 CC}. He also said, that DDI introduces as quickly as they can in existing spectrum. Can anyone please shed some light on this? Jacobs also stated, that he hopes DS to be available as soon as possibleŒ, however believes that schedulle is more optimistic than turns out to be correct {Q2 CC}. I would have liked to have seen his face on this one. I still believe, contrary to TRJ, that Qualcomm prefers CDMA2000 as long as they can not come up with a DS chip set solution Well, time will tell, will it not. However, he also stated, that QCOM is actively developing DS chips. In fact he said, that they are trying to obtain a GSM dual mode solution and that they WILL HAVE COMMENTS IN THE FUTURE on this. Now that sound great to me.