Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Art Bechhoefer who wrote (13308)	7/26/2001 10:21:36 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 196589

Art, [Qualcomm shares] are roughly 50 percent below fair value. I'd be interested in the details that brought you to that conclusion. --Mike Buckley

To: Art Bechhoefer who wrote (13308)	7/26/2001 11:17:24 AM
From: straight life	Respond to of 196589

The Daily Interview: Dialing In to Qualcomm's Future By Tish Williams Senior Writer 7/26/01 7:20 AM ET thestreet.com Qualcomm (QCOM:Nasdaq - news - commentary) has the last dance at the end of an exhausting earnings season for wireless investors. After today's market close, we'll be able to sum up the extent of the European and Asian slowdowns, as well as hear insights into carriers' buying habits with respect to third-generation wireless systems. Overall, it was a bad quarter for equipment, mostly bad for handsets and not half bad if you made your money as a carrier rather than selling to one. Some fears came true as European equipment spending tired, but apocalyptic handset predictions were tempered by a slight improvement from troubled Motorola (MOT:NYSE - news - commentary). China was a bright spot, though, with Motorola's 1% to 2% market-share gains being fueled by Chinese consumers' hungry purchases of low-end mobile phones. U.S. wireless carriers also signed up record numbers of subscribers, and got more money per month out of them, while spending less money in most cases to lure them into the fold. U.S. Bancorp Piper Jaffray's Sam May believes the fourth quarter will bring a little relief, and that by the end of 2002 we might see carriers getting $5 to $8 a month from subscribers to data-centered general packet radio service (GPRS) plans. For a look at the June quarter and the outlook for the future, read on. TSC: We've seen the wireless equipment market wet the bed this quarter -- May: -- the past three quarters. TSC: That, too. What kind of exclamation point do you expect Qualcomm to put on this season on Thursday? May: That's a good question. Qualcomm has a lot of moving parts to their CDMA franchise. We've factored a slowdown in CDMA [code division multiple access] subscribers, CDMA handsets and CDMA infrastructure into estimates. So I think we're OK for the past and for the present, but the interesting thing will be to see what management says about the future. They announced they're not going to spin off their chip business. That's going to be a big focus of what they'll be talking about. One reason they want to keep that is that they recognize going forward that it's going to be good to have two sources of revenue that are a little different -- one from licensing and one from chips. The reason they're not spinning off [their wireless business] is that they are somewhat concerned about visibility into future revenues. TSC: Do you think they see something down the line in the handset market? The company was straightforward; it said it thought it would have trouble licensing technology, but didn't. May: In the handset market we've seen Motorola bid up in the past two weeks since they announced because there are signs that they are taking market share on the GPRS side. They also showed some signs that handset volumes should pick up relative to expectations later in Q3 and Q4. I think Qualcomm sees that on the CDMA side, their 1XRTT [third-generation] networks are a little further out than the GPRS [2.5 generation intermediate] networks. Qualcomm may not be prepared to say they are seeing 1XRTT pick up right now [as GPRS is]. Net-net, I'm cautious going into the quarter, and I'm anxious to see what the company feels is the appropriate guidance. TSC: The mobile-phone market was one of the first to show weakness in 2000. Do you think they'll be the first to pull out of the slowdown, too? GPRS is supposed to help that. May: I think we'll see mobile phones pick up in Q4 of this year. Communications-subscriber growth has been reasonably good. The handset market has been dependent on two separate things -- the number of new subscribers and the number of current subscribers who buy new phones to replace their current ones. It's simple -- those two elements drive new phone sales. New subscriber growth has been reasonably positive. But there's another factor going on in subscriber growth, which is that operators have been weeding out their customers, because they were too aggressive last year in courting prepaid customers. They loaded a bunch of low-end, low-value customers onto their networks. Now they're getting those people off, so that seems to be bearing some fruit. Yesterday, AT&T Wireless (AWE:NYSE - news - commentary) reported 670,000 net new [customer] adds for the quarter. We can probably expect those numbers to go up. TSC: They also said their fourth quarter would show 1 million new subscribers. That sounds crazy. Is it? May: One million sounds pretty steep to me. They say they'll have 700,000 to 750,000 for the third quarter. TSC: Who are they shaking down? There's no new jump in phones to get people buying... May: GPRS will do that. GPRS won't create a stampede, but it will put a hot new phone out there. TSC: Nokia (NOK:NYSE ADR - news - commentary) seemed pretty defensive about GPRS phones -- they pooh-poohed Motorola's claims to GPRS, saying unless there's handset volume, who cares. What do you make of those comments? May: I think that's the absolutely right thing for an old world industry leader that's late with a product to say. It's true as long as Nokia can get their phones out there. The flip side is that Motorola is out there with a number of models that are getting positive accolades from carriers and from users. That's good news for Motorola and bad news for Nokia. TSC: Another bright spot from Motorola this quarter was China. Qualcomm is doing some good work there, too. People are saying Motorola raised its numbers by selling cheapie phones into China. May: We saw the 1.9 infrastructure award out of China earlier this year [the $1 billion in contracts won by several equipment providers in the spring to cover 1.9 gigahertz band systems]. We'll see a second, similarly sized set of contract awards later this year. There won't be any material CDMA handset sales into China this year, but there'll be some in Q4. It's next year that's reasonably positive. It all comes down to where are [Qualcomm's] estimates and what are the royalty rates. That's something that Qualcomm has guarded pretty carefully in the past. Qualcomm has had to give up royalties to gain access to the Chinese market. They're getting lower royalties there. TSC: But Qualcomm was applauded for signing up Nokia for full royalty payments. Why would China get such a good deal from Qualcomm? May: It's called 1.3 billion people. It's the largest market -- there are more GSM [global system for mobile communications] subscribers there than anywhere else in the world. They're just surpassing the U.S. in number of subscribers [now], and they're going to blow right by the world.