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

To: H. Bradley Toland, Jr. who wrote (125833)	12/4/2002 5:05:00 PM
From: pyslent	Read Replies (1) \| Respond to of 152472

"you'll likely make another 5 to 10 fold on an invest in Qualcomm today held over the next 8 to 10 years." As a QCOM long, I'd appreciate seeing your rationale for this statement. My personal belief has been that QCOM should be worth $100-150/sh once the WCDMA takes off. What kind of earnings do you expect in 10 years to justify a share price of 200-400? How many handsets/CDMA devices is that? Roughly speaking, QCOM currently generates 1 penny in earnings for every million handsets sold. For an eps of $20, that requires sales of 2 billion CDMA devices annually in a sustained fashion. That seems overly optimistic, even if the problems with WCDMA can be resolved, as we all hope. Just wondering what you consider to be a "likely" forecast. Thanks in advance. I certainly hope you are right <ggg>.

To: H. Bradley Toland, Jr. who wrote (125833)	12/4/2002 5:06:08 PM
From: hueyone	Read Replies (4) \| Respond to of 152472

Lastly, Qualcomm's earnings have gone up about 10 fold in the last 5 or 6 years. The tables below, with figures taken from the QCOM 10ks, put to rest any notion of a ten fold increase in earnings over the last five years. Table 1--Column 2 is absolute earnings in millions. Column 3 is absolute earnings in millions adjusted for stock option expense. Gaap Earnings Fiscal Year Gaap Earnings In Millions Ending In Millions Adj for St Options 9/30/97 91.934 73.197 9/30/02 359.677 125.796 But we also had dilution during this period, so the growth in EPS, does not match the growth in absolute earnings. And finally, if we proplerly include stock option expense as both the IASB and FASB have advocated at one time or another, the entire EPS growth over the five year period is a measly 23%. Table 2--Column 2 is GAAP EPS adjusted for splits, Column 3 is GAAP EPS adjusted for splits and stock option expense: Fiscal Year GAAP EPS Ending GAAP EPS Adj. for St. Option 9/30/97 .16 .13 9/30/02 .44 .16 Qualcomm's performance over the last five years does not entail a 10 fold increase in earnings by any stretch of the imagination. Perhaps the figures would look better if I went back six years, but we hardly have any evidence from a past trend that might indicate that investors could expect (another) five to ten fold of earnings going forward over the next eight to ten years as your post implies. Best, Huey

To: H. Bradley Toland, Jr. who wrote (125833)	12/4/2002 6:59:19 PM
From: hueyone	Read Replies (1) \| Respond to of 152472

Nonetheless, I have to admit that Qualcomm's overall performance across a broad spectrum of indicators has been extremely impressive to date. What I am struggling with is what is a reasonable price to pay for QCOM (again for me) and what we can reasonably expect going forward. Huey

To: H. Bradley Toland, Jr. who wrote (125833)	12/4/2002 8:04:52 PM
From: Gus	Respond to of 152472

Interesting expectation. At today's close, QCOM has a market cap of around $32B. 5x to 10x over 8-10 years translate to a market cap range of $160B to $320B over the next 8-10 years or by 2010-2012. Setting aside the issue of valuation, QCOM's pioneering CDMA patents (Gilhousen, Jacobs, Viterbi et al patents) start to become part of the public domain in 2006 or 2007. US Courts have traditionally granted greater deference to pioneering patents than ordinary patents, but it appears that by overturning the en banc CAFC ruling in Festo (which severely restricted the applicability of the doctrine of equivalents), the US Supreme Court may have signaled the start of a highly abstract debate with the CAFC over the scope of the doctrine of equivalents. It's not too clear yet how the patent landscape will look a few years from now and that will determine to some extent the kind of litigation risks of this stock later in this decade. Keep in mind that the Gilhousen et al patents were filed and issued during the the late 80s and early 90s when the US Patent System was not yet harmonized with the rest of the world including Japan, which doesn't have a doctrine of equivalents, and China, which appears to be drawing heavily from the lessons of the protectionist economic development model of a 19th century USA that was just starting to industrialize. That may very well include the deliberate absence of a comparable doctrine of equivalents in its patent system and that effectively makes it much harder to prove infringement. I think you should factor these into your expectations over 5 years.