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: A.L. Reagan who wrote (25000)	7/26/2002 8:20:26 PM
From: Clarksterh	Read Replies (2) \| Respond to of 196387

Although many people have already documented results from the CC, I figured I document some of the things that they went through that were not covered here. Note that I am sure that there are some things I misheard (e.g. some of the investment names): 1) KDDI expects to launch DO next spring, full service by the end of the year. 2) KDDI has >1M EasyNav subscribers 3) Sprint has already >1.3M 1X devices to subscribers 4) Dr. J. addressed the fact that with the new SMZ vocoder and antenna diversity (combined) the voice capacity for CDMA systems will double. Note that Dr. J. also addressed the bizarre claim (by AWE among others) that with their new AMR vocoder they can double voice capacity. He said what I had suspected, that the AMR vocoder does not come with a change in GSM specification to decrease the number of timeslots needed. Therefore the increased capacity with AMR is, at best, minimal. (In contrast CDMA does not have assigned timeslots so it can take advantage of new vocoder technology as it comes along.) 5) Thornley pointed out that Qualcomm was correct last quarter when they predicted that the Korean ban on handset subsidies would have minimal impact on handset sales. 6) Conversions to 1x - Altel soon, US Cellular to convert from TDMA to 1x by later this year. 7) Unicom - Reports subscribers for only a portion of their network. If you assume the same penetration rate for the portion of their network that they don't report the subscribers are about 1.4M (about 40% higher than the reported number). Also, currently Unicom has 1x in trials in 7 cities but upgrade coming up soon. 8) Claim by Qualcomm is that voice will remain the dominant revenue producer for the next few years even at the most aggressive pushers of new technology such as KTFreetel. For instance KTFreetel expects that 25% of revenue in 2005 will be data, the rest voice. But this shouldn't minimize the impact of data as a differentiator. If people can buy a phone with data capability or one without, for about the same price, which will they choose? 9) 300 BREW Applications on sale now today running on 19 types of handsets from 7 manufacturers. And 50 BREW handsets are in development now. Over 1M handset with BREW capability have had their BREW capability used. 10) 1X chip shipments were 11M this quarter, and will be 15M next Q. 11) The number of things that the 6100 (sampling in Q4) can do is absolutely amazing - MPEG encoder/decoder, SMV Vocoder, Java accelerator, 2D/3D accelerator, ... - I couldn't write fast enough to keep track of everything so I am sure I left some important items out. 12) Goodwill amortization from Snaptrack will end in Dec Q. 13) The $139M pumped into QSI this quarter went to 3 places: Vesper (an ongoing $25-35M per Q), Pegasso (for interim financing) and an additional Inquam(sp?) investment. (Note: the fact that almost all of these investments are underwater does not bother me as much as it seems to bother most people - what telecom service provider is not underwater now? These are exactly what Qualcomm claims - Strategic Investments!!! Even if they never come above water (and I suspect that in a few years they will), that is not their only purpose. They are furthering the rollout of CDMA systems, and now is probably about the best time to do that, when Qualcomm has cash and is cash flow positive (and every other telecom manufacturer is just struggling to survive).) 14) Although Relliance(sp?) did not meet certain conditions which would require Qualcomm to invest another $200M, it is probable that Qualcomm will invest anyway (Note: although I suspect that they will change the conditions to get more for their $200M.) Clark

To: A.L. Reagan who wrote (25000)	7/26/2002 8:31:02 PM
From: Eric L	Read Replies (1) \| Respond to of 196387

A.L., << Congrats Eric on the 25,000th post. >> Is that what some call a grub? <g> If so that is a pretty good grub is it not on the best wireless thread on SI? << It is interesting that Lehman cut the price target. >> Hurt me. hurt us. << Don't necessarily disagree with their "conservatism" but methinks the price target methodology has little to due with any rigorous discounted PV model, and more to do with finger in the wind. >> I agree. << FWIW, on the anecdotal front, my tenant the Verizon reseller reports little effort by Verizon to promote 1X (both handsets and network available in our area) and scant customer interest. Sort of reminiscent of the Globalstar USA roll-out so far. >> Well, I spent about an hour with the manager of my local full service (large - serves a pop of almost 1 million) Verizon store this week talking to the manager that sold me my first cdma/amps unit (QCP800) one month after BAM really went commercial with IS-95 (March 97) and has since sold my wife and I, 5 other dual or tri-mode devices. He advises that Verizon Express isn't being pushed much at store level (being pushed to corporations) and neither are the 1xRTT handsets in stock although those are moving pretty well. His staff is pushing data however (2-way SMS and MSN WAP) much more diligently than they were a year ago. We did not really get into a discussion of BREW. He expects a 1xRTT push to start just before Thanksgiving, but could not (not would not) provide a lot of detail. Best, - Eric -

To: A.L. Reagan who wrote (25000)	7/27/2002 8:28:32 AM
From: Eric L	Read Replies (1) \| Respond to of 196387

re: SoundView Checks In on FYQ3 Despite the fact that overall Qualcomm reported better results than Matt Hoffman predicted in his July 24 June Quarter Preview in which he lowered his QCOM price target, he continues to have a "Neutral" rating on Qualcomm and is "skeptical" about markets capability to absorb the 1x chips QCOM plans to ship and he noted that "the primary negative in the report was cash flow, which was only $30 million in the quarter despite the strong earnings". However he did note positively that "the weak cash flow was primarily due to significant investments in market expansion". He projects 77 million cdma handset sell-in this year but I'm not sure whether or not he has lowered hid 421 million total unit forecast this year. I suspect he might have or will be doing so. Hoffma, btw, has 2 wireless favorites in Motorola and Openwave and OPWV has been decimated in the last 3 weeks. Excerpts below with a link to both the preview and review: >> QCOM:3QF02 - Strong Results,What Next? Matt Hoffman Jennifer Baxter July 26, 2002 research.soundview.com Stock Net: QCOM reported 3QF02 results ahead of consensus expectations. We think numbers will generally go up across the Street, but we maintain a healthy level of skepticism about the ability of the end markets to absorb all of the 1X chips QCOM is producing for 2HC02. We remain neutral on the shares with the stock at the low end of our mid-$20s to low-$30s trading range. Industry Opinion: We believe the 2002 CDMA handset market will be up slightly in 2002 to 77M units as 1X packet data technology, color screens, and new applications emerge late in the year domestically. Korea and Japan remain key leading-edge markets. • Qualcomm reported 3QF02 results ahead of consensus expectations with pro-forma revenue of $721 million and EPS of $0.24. Results were driven by strength in 1X in South Korea and Japan. • Chipset shipments were in-line with the company’s June preannouncement at 16 million, including 11 million 1XRTT chips shipped. • The primary negative in the report was cash flow, which was only $30 million in the quarter despite the strong earnings. The weak cash flow was primarily due to significant investments in market expansion. • We are raising numbers slightly for the September quarter to get to the low end of chipset guidance for September, but remain highly skeptical about the ability of the end markets to absorb all of the 1X chips QCOM is producing for 2HC02. <snip> CDMA Handsets: Qualcomm reiterated its calendar 2002 CDMA handset forecast of 80-85 million. Our forecast remains 77 million. We count about 13 million 1X subscribers to date, with another 3 million having 1X handsets but not yet activated on 1X networks. We are modeling handset ASPs down 3% sequentially. <snip> Guidance and Estimate Changes: Qualcomm has essentially raised guidance in some areas for next quarter. We have raised our chipset forecast slightly for the September quarter, increasing our revenue estimate to $753 million from $727 million. Our EPS estimate goes to $0.25 from $0.24. We think numbers will generally go up across the Street after the report, but we are going to maintain a healthy level of skepticism about the ability of the end markets to absorb all of the 1X chips Qualcomm is producing in 2HC02. We remain at a Neutral on the shares with the stock at the low end of our mid-$20s to low-$30s trading range. Qualcomm Guidance vs. SoundView Estimates vs. First Call New Old QCOM QCOM Consensus SNDV FY02 EPS $.93-$.94 $.90-$.95 $.89 $.92 FY02 Rev Growth 7-8% 4-8% 4.5% 5.5% CDMA Handsets 80-85m 80-85m Handset ASPs Down 5-10% Down 5-10% Price Target Valuation and Risks: Based on our belief that there remains some risk to 2H02 and F03 estimates, we believe the stock will be range-bound (mid-20s to low 30s) until the 1X launch in the United States demonstrates momentum. We do not think that will happen for at least another quarter. Our price target of $34 is based on our sum-of-the-parts valuation, and was recently lowered from $38 due to the impact of the recent price decline of comparable fabless semiconductor companies. Sum-of-the-Parts Valuation & Price Target YE02 $m YE02 $/Share QTL Royalties $17,596 $22 QCT Chipsets $9,950 $12 QIS wireless Services $412 $1 Sum of Parts $27,985 $34 Debt $0 $0 ------------------------------------ Valuation target $27,985 $34 Risks include: 1) Slower than anticipated CDMA handset sales. 2) Additional delays in W-CDMA rollouts. ### - Eric -