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

To: qveauriche who wrote (125718)	11/27/2002 3:04:54 PM
From: cfoe	Respond to of 152472

You also know that the GAAP number is a depressed number ... One of the important indicators of QCOM's financial results going forward is that the GAAP results will be approaching the Proforma numbers and not the other way around. For example, after this quarter, the SnapTrack write-off is over. So GAAP will move closer to Proforma to the tune of $65MM per quarter.

To: qveauriche who wrote (125718)	11/27/2002 5:28:13 PM
From: golfinvestor	Read Replies (1) \| Respond to of 152472

<Recently QCOM announced that it would either begin paying a dividend or the repurchase of common shares> I believe the statement was QCOM was "considering" the two options, which is a ways from saying they "would" do either option.

To: qveauriche who wrote (125718)	11/27/2002 11:50:54 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 152472

A good reply, as always. You are correct that share dilution can be offset by share repurchase. To do so, the company will have to become much less porous when it comes to retaining earnings. I'd be more inclined to factor in their ability to combat dilution when they show a sustainable ability to build shareholder equity through retained earnings. The cash contribution of the last couple of quarters is a significant departure from their entire past history. Every trend begins with a few data points. But not every few data points are a trend. As far as quantifying buy back is concerned, they risk negative cash for several years if they try buy back 4% of shares per year. I also suspect that as investors pressure companies to adopt less dilutive employee awards, we will see lower dilution going forwards, but also higher cash compensation acting to erode profitability. Hard to say. Could go either way by plus or minus 30%. You think pro-forma is realistic to trend forwards, I think GAAP. Ok, we'll agree to disagree here and I won't hold it against you. Over the long term they had better converge. I also agree that the strategic losses division had better be wound down. If however it turns out that propping up struggling operators is a necessary form of "marketing" expense, then wishing it all away might be an over-estimate. I can meet you more than half way and up the profit baseline by a factor of two if you like. Sorry about my 16x forward pro-forma. Yes, if "earnings excluding what management projects they would have if they hadn't spent money the way they did" is the baseline then it would be 8x growth. As you can tell, I dislike pro-forma enough so that I don't even pay attention to what it is when I do the calculations <ggg>. But the meat comes into the fact that you assume 6x current global handset volume is "nowhere near planetary saturation". Two thirds of the population lack the income necessary to afford access to clean water and even electricity (which is needed to charge the battery, if we stop to think about it for a second)... let alone have enough money to pay $29.95 per month for 3G data access. By some estimates we are at about 30-40% of the addressable market in global cellphone penetration (call current penetration X). Hard to get 6x the volume out of 3x the subscriber base unless folks start buying cellphones twice as frequently. Which they might do if the price was cut in half. Which, I suggest is more than likely to be more than a certainty given 5% per year rate of erosion on ASP (which I did not factor in, but I guess I should, while we're at it). 15 years is 10 iterations of Moore's law. Expecting price to fall only by half over so many iterations is, achem, optimistic. So if I net out the neglected effects of price erosion, market penetration limits, earnings growth and share buyback against each other... these fine grained refinements to my model cancel each other out and end up at the same conclusion. Plus or minus factor two. And yes, my model failed to incorporate revenue from other goodies. Which goes back to your initial comment about core business. It's easy to forget that Qualcomm is where they are because they own a patent portfolio based on some fundamental underlying IP filed many years ago on a technology that is currently essential to the 3G standards. Extrapolating 15 years into the future that they will attract revenue from every single cellphone sold is quite generous. It is not a certainty that Qualcomm will be able to continue their perch on whatever technology forms the basis for 4G or 5G technology. If, for example, OFDM or some other derivative is adopted as the 5G standard then Qualcomm won't be able to extract a dime and indeed might end up having to pay net royalties in order to make chips containing its then-public-domain CDMA in conjunction with whatever other wireless bit-transport protocol is selected. How many Moore's law cycles are there between now and 15 years from now? I believe strongly in the future of Wireless goodies everywhere. But if the future unfolds like it has in the past, the current incumbents won't be the ones enjoying the spoils. Oh, it's a foregone conclusion that Qualcomm will derive a great deal of business from stuff other than CDMA 15 years from now. Just like it's a foregone conclusion that they won't be deriving a lot of revenue from any of their current patents 15 years from now. I think you will appreciate that merely extrapolating a current extension of their unique perch on fundamental IP overstates what will really happen by enough to compensate for whatever else they do meanwhile that I didn't factor in. The margin from IP is huge (QTL). The margin from competency (QCT) is not so high. I think you can appreciate my assumptions preserving the business model are biased towards the highest margin business so any correction serves to reduce earnings capability. By more than enough, I suspect, to negate stuff I've forgotten to factor in. I reiterate, expecting they will retain "tollgate" position on a highway that's under construction, through a period that's longer than most folk on this thread have been adults? Well, good luck. John