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 (91109)	4/23/2010 4:15:28 PM
From: Gaffer	1 Recommendation Read Replies (1) \| Respond to of 197227

From Bernstein Research …. -QCOM’s FQ310 guidance was about in line with consensus on revenues, but slightly below on EPS. Annual EPS guidance was slightly raised (by .02) with no change to annual revenue guidance. The company guided to GQ10 revenues of $2.5-2.7B, with the midpoint about in line with consensus of $2.66B. Chipset shipment guidance was well above expectations at 97-102M. However, pro forma EOS guidance of $.50-.55 was slightly below consensus at $0.55 likely driven by further ASP pressure (and resulting margin impact) in QCT as the company drives chipset pricing down to increase share (with margin compression expected to trough in the June quarter). Full year EPS guidance was raised slightly from $2.10-$2.30 to $2.12-2.32, with revenue outlook unchanged at $10.4B-$11B. However, the slightly worse than expected outlook for next quarter took some wind out of the positive momentum driven by the recent guidance raises. - Chipset ASP declines, while within “company expectations,” were likely a bit more severe that investors anticipated (although volumes were greater), and somewhat surprising to us given prior commentary at the company’s guidance raise suggesting a richer QCT mix in the quarter. QCOMs chipset ASPs declined by 5.4% following a 6.4% decline in the previous quarter. While management stated that this decline was within their expectations, it was a bit above ours, particularly given management commentary at their guidance raise a few weeks ago suggesting a richer mix in QCT. Chipset operating margins came in at 22% in the range of company guidance for the full year (22-24%) management suggested that the June quarter would likely be a trough for chipset operating margins and price degradations. Unit guidance, however, was very strong at 97-102MM. lending some credence to the company’s claims of share gains. - The most important aspect that management failed to stress on the call in this – Nothing fundamentally has changed for the outlook of the licensing business after the modifications to the metrics. The sell off following last quarter’s earnings call, while extreme, was understandable, as investors were highly concerned that the fundamentals of QLT were broken. In this case, however, nothing has changed regarding the fundamental outlook for QCOMs licensing business. Regardless of adjustments to historical units and ASPs, it is important to note that the dollar market value (the product of the two) has remained unchanged. In fact, while QCOM’s new fiscal year ASP guidance is down a bit more than prior (1%), their calendar year unit forecasts are up by more (2.5%). While it is not exactly appropriate to apply fiscal year ASPs to calendar year units, this does suggest that the total device market value embedded in QCOM’s revised methodology and guidance might actually be even a bit higher than previous. - However, we believe management’s stint in the “penalty” box is unlikely to end soon. While we believe the fundamental story behind the company’s licensing business remains essentially unchanged vs. previous, we see few short term catalysts for the stock, and the “credibility overhang” that has pressured the shares in recent months is unlikely to lift anytime soon. Given guidance that, while likely conservative, was below consensus following what amounted to a double preannouncement (nicely killing any shorter term momentum in the shares), and a guidance methodology presentation that was, at best, confusing, we believe the credibility overhang on the stock is likely to continue for some time. However, we note that the shares are likely to open tomorrow in the neighborhood of the price range seen directly after last quarter’s call (when the fundamental outlook was substantially worse that today’s) and believe an 8% sell off is an overreaction. We lower our estimates and target price slightly, primarily due to more conservative assumptions around chipset pricing. And rate the company Outperform with a $51 price target. Investment Conclusion We believe that QCOM represents one of the best ways to play the 3G growth trend. We believe investors will continue to benefit from a highly profitable licensing stream, share gains in their chipset business, and potential upside from new application and products. We rate the stock Outperform with a $51 price target

To: Jim Mullens who wrote (91109)	4/23/2010 4:55:29 PM
From: BoonDoggler	Respond to of 197227

Yes, and I still tend to agree with Don Dodge. From my (perhaps simplistic) perspective, stick a 3G chip in tablets of various sizes running Android, change the billing to pay by the byte and allow an account to spread across devices, and the current estimates for 3G devices sold in the coming years will be completely blown out of the water. BoonDoogler posted a link to Don Dodge’s blog a while back (predictions for the 2010 and next decade) using some info from that same MS report