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Strategies & Market Trends : Gorilla and King Portfolio candidates - Moderated -- Ignore unavailable to you. Want to Upgrade?

To: sschahal who wrote (698)	2/4/2004 10:30:31 PM
From: tinkershaw	Respond to of 2955

would have thought that all these multiplied together - in a decent market - should lead to 30-40% CAGR for royalty growth (just guessing) I will have to take more time to really put the numbers together, but to me it comes down to valuation and the growth needed to justify the present valuation, and my theory that to get extraordinary returns ARM will have to beat those expectations or otherwise the Street has already priced them in. 30-40% royalty growth does not get you there if licensing revenues stay flat. And the type of growth needed is made more difficult when you consider that ARM's true Gorilla market, cell phones, has limits to its growth rate going forward and that ARM will have to rely on booming markets in other areas where it is not the Gorilla. In addition, the sort of unit volumes you start talking about for royalties alone to get ARM making extraordinary returns from here given present valuation start producing absurd numbers, like 1/2 of all semiconductor chips being ARMED, that sort of thing. I will try to work out some more numbers than I did on the Fool and get back on the topic. Meanwhile, while ARM's price is falling it may move itself back into a valuation I'd be happy with again. Tinker