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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: cfoe who wrote (7667)	2/23/2001 2:29:51 AM
From: cfoe	Read Replies (2) \| Respond to of 196631

CSM chips backlog, sales, and ASP: I spent an hour this evening working on the QCT portion of the QCOM financial model with Khan Liu of this thread and we came up with a couple of interesting observations regarding CSM chip backlog, sales and ASP. On Q1-01 CC Don Shrock said that there were about 3 million channels of CSM chips in the backlog. Dr. IJ offered that each CSM now offers 32 channels per chip. Simple division gives us a CSM chip backlog as of 12/31/00 of about 93,750. Khan and I then asked ourselves how long it would take to work off that backlog.... It was reported on this thread and elsewhere that during the Gilder Telecosm conference last September Andrew Seybold (I think) made the comment that a non-CMA SP was switching to CDMA and had bought up all of the infrastructure for the coming year. Each time I was reminded of this comment, I remember wondering how it could be that NT, LU, MOT, ERICY and Samsung were all completely capacity constrained in CDMA infrastructure. Tonight it occurred to me for the first time that Seybold may have been referring, not to the base stations themselves, but to the CSM chip sets! Obviously they are part of “infrastructure,” as the base station would be useless without them. Now we can assume that Korea has received and installed a fairly sizeable part of their 1X CSMs, with some part of the current production being intended for completing their system. Japan must be in line to get production as well. Sprint and Verizon are starting their systems later this year; so cannot tell it they are receiving CSM chips yet. Not sure where China is in all this yet as well. But what about the customer referred to by Seybold? None of the current customers referred to above fit the description of a non-CDMA SP. It then occurred to Khan and me that a large part of the backlog may be intended, or at least caused by, this mystery customer. NEXTEL! Some or all of the backlog CSM chips are earmarked for the NEXTEL buildout. The deal is done – not under evaluation! Anyone care to comment about the conclusion we reached? Now to the numbers. Based on the above, we started by assuming that the backlog would be shipped this year Given Thornley’s statement that CSM revenues were under 10% of QCT revenues we used 9%. We assumed the following quarterly volumes for CSM chips (in thousands): Q1=28, Q2=32, Q3=39, Q4=47. The ASP in each quarter would be around $1,000 to keep total CSM revenue at 9% of QCT total revenue. BTW, this works out to $31/channel. Using the Q2 through Q4 CSM volumes above means QCOM would ship 3,776,000 channels in the remainder of fiscal 01. Does the foregoing sound at all reasonable? If so, our next task is going to be tackling the QTL numbers – seeing if we can break out some estimate of licensing from royalties and also separate royalties into their three components: devices, chips and infrastructure. Comments, corrections welcome.