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

To: JGoren who wrote (25541)	3/29/1999 11:57:00 PM
From: Morgan Drake	Respond to of 152472

ERICY probably has pictures of Cabi w/sheep.

To: JGoren who wrote (25541)	3/30/1999 2:03:00 AM
From: SteveG	Respond to of 152472

CSFB Cabi on QCOM - BUY MID CAP Qualcomm (QCOM) Qualcomm Upgrading to BUY; New Focus Provides Opportunity For Success Summary Qualcomm's move to divest itself of its infrastructure business is likely to help the company improve on its historically lackluster margins. We are upgrading the stock to reflect that Qualcomm has several strong businesses that are likely to do better as the company focuses on them for its core growth. With the elimination of the losses from infrastructure and the expectation that the company will show improving margins, we are raising our estimates, on a preliminary basis, to $3. 50 from $3.35 for FY:00. Price Target Mkt.Value 52-Week 3/26/991 (12mo.) Div. Yield (MM) Price Range 111.56 $125 $0 None $8,277.8 $0 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 9/00E $3.42 3.35 33.3X 9% 13.0 $8.24 9/99E 2.71 41.2 9% 15.9 6.78 9/98A 1.63 68.4 9% 21.3 5.16 Dec. March June Sept. FY End 2000E $0.79 $0.80 $0.90 $0.93 Sept. 1999E 0.65 0.60 0.71 0.74 1998A 0.58 0.25 0.27 0.54 ROIC (12/97) Total Debt (12/98) 3116 Book Value/Share (12/98) 13.67 WACC (12/97) Debt/Total Capital (12/98) 22.5 Common Shares 74.2 EP Trend2 Est. 5-Yr. EPS Growth 15% Est. 5-Yr. Div. Growth NA 1On 3/29/99 DJIA closed at 9822.2 and S&P 500 at 1282.6. 2Economic profit trend. Qualcomm, the innovator of CDMA, manufactures infrastructure and handsets, as well as licenses its patented technology to major wireless handset and infrastructure manufacturers. In addition, it designs and develops CDMA chipsets, email software, 2-way mobile satellite systems and supplies equipment to the Globalstar network. Investment Summary We applaud Qualcomm on its move to divest itself of its wireless infrastructure business, a business that has contributed to margin degradation for the past two years. As a small player in the wireless market, we were amazed that Qualcomm continued to compete amongst large brutal competitors including Ericsson, Lucent and Nortel. With the sale of its infrastructure business, we believe Qualcomm management has affirmed its commitment to becoming a profitable, focused player in the wireless industry. As a result we are upgrading the shares to a BUY from HOLD to reaffirm our satisfaction of the company's decision. Although the stock has moved substantially over the past two trading days, Qualcomm is now in a position, in our view, to move its profitability closer to industry average margins, thus a substantial earnings upgrade is feasible over the next two years. We are currently revising our FY 2000 estimate to reflect this change. Our preliminary estimate range is $3.50 for fiscal 2000. Our previous estimate was $3.35. We expect to publish our detailed model after a further review with management. Sale of Infrastructure business key to expanding margins Qualcomm's move to divest itself of its infrastructure business is likely to help the company improve on its historically lackluster margins. We estimate the infrastructure business generated approximately $500-600 million in revenues for FY:98 and potentially could have lost as much as $80 million. We now expect that the company can eliminate the management distraction of a business segment plagued with challenges as an independent entity and move forward with its corporate plan to show improving margins toward industry averages. Focus on core businesses translates into solid returns We upgraded the stock to reflect the fact that Qualcomm has several strong businesses that are likely to do better as the company focuses in them for its core growth. Qualcomm has proven it can be a very solid player in the CDMA chip set business and continues to garner a substantial market share position in that market. We anticipate that with the CDMA market growing at a solid near 100% rate the next two years, the company can demonstrate solid revenue growth despite the onset of price erosion. With a more focused organization free of conflict with its customers, the company may even manage the erosion factors to continue to show solid returns from that business segment. In handsets, Qualcomm has demonstrated that it can develop consumer friendly products. With a renewed focus on profitability in this segment, the company could make substantial gains in this business. Importantly, with a focus on improving quality, which was problematic last year, the company could eliminate a substantial amount of reworking expenses that were required on its products. Industry average operating margins for the handset business are well into the double digits while Qualcomm remains in the low single digits. Although challenges remain, we expect that the company is committed to improving on this metric. With pricing for CDMA eroding at a rate over 20%, the company will be required to take aggressive steps to reduce costs and exploit scale volume benefits through growth. We believe that free of the infrastructure influence, the company can free capital resources to fund the growth of this business. Raising to BUY With the elimination of the losses from infrastructure and the expectation that the company will show improving margins, we are raising our FY 2000 estimate to $3.50 from $3.35 for FY:00. We are also upgrading our rating to BUY to reflect our endorsement of Qualcomm's new management focus on margin improvement and profitable growth.

To: JGoren who wrote (25541)	3/30/1999 2:12:00 AM
From: SteveG	Read Replies (1) \| Respond to of 152472

Cabi again - ERICY:STRONG BUY LARGE CAP Ericsson (ERICY) Ericsson acquires Qualcomm's Infrastructure Business Summary Ericsson acquired QCOM's infrastructure business, which we believe is a net positive for the wireless industry in its advancement to 3G and also a win win situation for both companies. ERICY gains engineering talent a valuable asset that is in short supply and key to introducing new capabilities on a timelier basis. ERICY now has the opportunity to supply a greater portion of its customers' needs as it will address a greater percentage of their network. ERICY will have a full complement of products - essential to continue to be a top 3 player. We reiterate our Strong Buy rating with a $35-40 price target. Price Target Mkt.Value 52-Week 3/24/991 (12mo.) Div. Yield (MM) Price Range USD 21.06 $35-40 $0.25 1.2% $42,056.8 $34-15 Annual Prev. Abs. Rel. EV/ EBITDA/ EPS EPS P/E P/E EBITDA Share 12/00E $1.30 16.2X !Zero Divide 9.6 $2.46 12/99E 0.95 22.2 !Zero Divide 12.8 1.87 12/98A 0.80 26.3 !Zero Divide 14.9 1.60 March June Sept. Dec. FY End 2000E $0.78 $0.80 $0.95 $1.30 Dec. 1999E 0.07 0.18 0.23 0.47 1998A 0.10 0.21 0.20 0.28 ROIC (12/97) Total Debt (12/98) -- Book Value/Share (12/98) $3.90 WACC (12/97) Debt/Total Capital (12/98) NM Common Shares 1,997 EP Trend2 Est. 5-Yr. EPS Growth 20% Est. 5-Yr. Div. Growth N/A 1On 3/10/99 DJIA closed at 9772.64 and S&P 500 at 0. 2Economic profit trend. Ericsson is a leading system supplier for both wired and wireless telecommunications equipment, including base stations , mobile phones, equipment for wireless access to telecommunications networks and mobile data communications; its wireless handsets and infrastructure are marketed toward GSM, TDMA and AMPS. Investment Summary In a move that has been rumored for weeks, Ericsson acquired the infrastructure business including R&D resources of Qualcomm. We believe the transaction is a net positive for the wireless industry and should also be considered a win win situation for both companies. With the resolution of all IPR issues between the two companies the development and advancement of third generation (3G) wireless systems can continue without risk of potential litigation. 3G advances promise the market an opportunity for wireless to become as ubiquitous as our wireline phones of today. Thus, we believe the industry opportunity for growth continues to look brighter as these issues are now put to rest. For Ericsson specifically, we believe the positive aspects of the transaction can be summarized in three points: First, Ericsson gains access to additional CDMA resources including engineering talent from Qualcomm employees it acquires as part of this transaction. With Rf engineers in short supply, the ability to find a group of talented individuals should be considered valuable. We expect the integration of these individuals into the Ericsson development team should provide the company an opportunity to introduce new capabilities on a timelier basis. Second, many of Ericsson's largest customers, like Vodafone and Airtouch have found that they have more than one technology deployed within their portfolio of networks. It is the interest of such operators to ensure that there is a valid and smooth migration path as new standards for 3G emerge 41. With the litigation having been settled the risk of migration or lack thereof is removed. Additionally, Ericsson now has the opportunity to supply a greater portion of this large carrier's needs given that it will address a greater percentage of their network. Finally, Ericsson can enter the handset arena with a full complement of product. We believe this is important as it will insure that Ericsson maintain a presence in all standards and that it can continue to be a top 3 player. We continue to recommend Ericsson with a Strong Buy rating. Given this transaction, Ericsson can address a greater percentage of a rapidly expanding market. We expect a revenue growth and earnings recovery to materialize during H2: 99 and believe that there will be growing enthusiasm for the shares as the prospects of this phenomenon become visible. Our twelve-month price target is $35-40.