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: Jim Mullens who wrote (32297)	2/13/2003 9:15:51 AM
From: rkral	Read Replies (1) \| Respond to of 196546

Jim, re "The accrual estimates had to have been made in late December and they were still using their conservative 27 million MSMs estimate." What does the accrual (plus estimate) of royalties have to do with the handset estimate? You provided a quote from the 10-K showing QCOM accrues and estimates royalty revenues ("royalties"). slacker711 quoted q1000's notes showing that QCOM estimates handset shipments. Both are current quarter (or year) estimates. But the current quarter royalties do not apply to the current quarter handset shipments, IMHO. Specifically, for F1Q03, the $212 million royalties do not apply to 27 million handsets. It might apply to a 18 million handset (a WAG) estimate made for 2 quarters back, for example. In short, we don't know the time lag between handset shipments and a "reasonable estimate of royalties" for those handsets. Additionally, you have been presenting the ratio of QTL Earnings Before Taxes ("EBT") to QCT chipset shipments. [edit: As you suspect], that is not appropriate in an environment of rapidly increasing chipset shipments because .. we don't know the time lag between MSMxxxx chipset shipments and handset shipments. Someone probably does know those lags, but I can't recall them being presented on this thread. QCOM's 10-K statement "When our licensees report royalties for which we accrued revenues based on estimates, we adjust revenues for the period in which the reports are received”" was a bit of an eye-opener. To me it means QtoQ comparisons can be mis-leading, and it's better to compare averages of at least 2 quarters. Regards, Ron

To: Jim Mullens who wrote (32297)	2/13/2003 9:21:18 AM
From: slacker711	Respond to of 196546

I’m trying to remember, but is the royalty rate lower to handset vendors if they include the QCOM MSM in the handset? I’m now getting a vague recollection of this, and if this is what you are saying, then you are very correct in saying that “QTL revenue per MSM.. was bound to drop” since market share increased significantly. I dont think that the royalty rate drops based on whose ASIC is inside. I was just commenting on the nature of the ratio itself. An example is probably the best way to show this.... Assuming an ASP of $200 and a royalty rate of 5%. If during a particular quarter, Qualcomm had a 50% share of a 10 million handset market, the $QTL/MSM ratio would work out to $20 per MSM (royalties of $100 million). If the market was flat for next quarter, but Q's marketshare went up to 100%, the $QTL/MSM would drop to $10 per MSM (same total royalties of $100 million). This might also help. Qualcomm has occassionally put the number of handsets shipped each quarter into one of their graphs (usually during analyst days). I eyeballed the numbers and recorded them here. Message 18274267 Units QTL 3Q '99 10m 4Q '99 14m 1Q '00 15m 184 2Q '00 15m 157 3Q '00 15m 161 4Q '00 15m 166 1Q '01 22m 186 2Q '01 17m 225 3Q '01 16m 180 4Q '01 20m 189 1Q '02 21m 210 2Q '02 18m 194 3Q '02 19m 199 4Q '02 22m 243 1Q '03 (proj) 26m Slacker