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To: Jon Koplik who wrote (111245)4/19/2012 12:15:10 PM
From: Art Bechhoefer
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Jon, being relatively inexperienced in options (preferring long term positions), I defer to your judgment. I would note, however, that over the years, beginning about 2003, I've generally made a good return on my option positions, which included buying calls when I thought the shares were oversold, selling covered calls, when the shares seemed to be at a plateau, and selling puts when future business prospects look under appreciated.

I agree that a typical put sale strategy works when the put expires worthless. But in the case of Qualcomm, which wants to reduce its capitalization by buying shares, it makes sense to allow for the possibility of buying shares put to them, realizing the premium in the put selling price as the main benefit.

If an investor thinks that $65 is undervalued for QCOM shares, given their long term prospects, then it makes sense to sell a deep in the money put option, knowing that the $65 price paid for the shares is still a good deal when part of the cost is covered by the option premium. Then again, the scale of the transaction matters. There may be a legitimate difference in strategies for those dealing in thousands, rather than millions of shares.


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To: waitwatchwander who wrote (111242)4/19/2012 12:24:52 PM
From: Jim Mullens
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Trevor, Re; Fusion 2…………………………….

which chipsets encompass Fusion2? I don't ever remember hearing of a product release under that name. How do the chipsets you mentioned fit in with the "combo chip" comment? Wifi capability is missing.

“Fusion” is QCOM's terminology for achieving LTE connectivity by marrying an LTE MDM with a non-LTE MSM.

I can’t recall Fusion “2” being mentioned before, but that could refer to their most recent 28nm MDM 9615 .

The “combo chips” marry the Atheros WCN chips ( WCN3660 - in production / WCN3680- sampling) with the S4 Snapdragon to provide WiFi, BT, GPS, FM connectivity.

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To: slacker711 who wrote (111243)4/19/2012 12:36:08 PM
From: Jim Mullens
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Slacker, re: Increases Fab expenses…………………….

I didnt express myself well. I advocate a closer, and unfortunately more expensive, relationship with the various fabs. Q is going to need to push harder on the TSMC/UMC/GF to close the manufacturing gap with Intel. That means funding more R&D both internally and at the fabs.

I think it was me, not you that was unclear, as my tie in to Merrill’s comments appeared to suggest that you agreed with Merrill’s possibility of Q building a fab facility.

Would a JV make more sense economically, wherein Q would have higher priority on the output by funding part of the Capex?

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To: waitwatchwander who wrote (111232)4/19/2012 12:40:40 PM
3 Recommendations   of 145520
>>should they have built a chip foundry instead of Mirasol?

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From: mindy19684/19/2012 12:45:56 PM
1 Recommendation   of 145520
Qualcomm Loses Its Sparkle as Supply Constraints Present a Double-Edged Sword

By Michael Comeau Apr 19, 2012 11:55 am

Qualcomm's weak third-quarter guidance is weighing on the stock.

Heading into yesterday's second-quarter earnings report, I considered Qualcomm (QCOM) to be the best semiconductor stock on planet Earth.

However, the company's weak third-quarter guidance has this momentum favorite hitting the skids following a steady 22% grind higher year-to-date.

So what's going on here?

Well, Qualcomm's second-quarter numbers were undeniably strong. The company reported a profit of $1.01 per share, beating consensus expectations by a nickel. Revenues came in at $4.94 billion, comfortably ahead of Wall Street's outlook.

However, in a major reversal from last quarter, Qualcomm didn't put up the big next-quarter guidance the bulls were seeking.

For the third quarter (ending in June), Qualcomm expects to earn $0.83 to $0.89 per share, the midpoint of which is below the $0.89 Wall Street consensus. Likewise, the company's revenue outlook of $4.45 to $4.85 billion does not compare well with the $19.4 billion consensus.

These aren't disastrous numbers -- but they're just not quite strong enough for a company facing high investor expectations.

Qualcomm is facing what is normally an extraordinarily high-quality problem: It is supply-constrained in its 28-nanometer 4G/LTE products. It just can't meet customer demand.

In isolation, this is a bullish development because it means the company is selling everything it can make.

However, Qualcomm did admit on the conference call that in some cases, customers were turning to solutions from Qualcomm competitors.

In terms of actual dollars and cents, this might not be a big problem. However, it is a reminder that for all of its strengths in terms of intellectual property, Qualcomm's chips do have some commodity flavor to them, since depending on the particular application, a customer can turn to a rival like NVIDIA (NVDA), Marvell (MRVL), Texas Instruments (TXN), Broadcom (BRCM), or Samsung (SSNLF) for a competing solution.

Strong earnings and guidance have a knack for sweeping investor concerns under the rug. But when weakness hits, folks start looking for warts where they never did before.

Frankly, if Qualcomm hadn't mentioned this issue, I think the stock would actually be up today.

Way back in January, after performing some basic algebra on Strategy Analytics' industry numbers, we determined that Apple (AAPL) and Samsung accounted for 86% of smartphone industry growth in the fourth quarter of 2011 -- a statistic that has been largely ignored by the mass media despite the fact that I trot it out every change I get. Does no one listen to me? (See: Samsung and Apple Now Account for 86% of Smartphone Industry Growth.)

Anyway, check out my favorite chart: When we back out Samsung and Apple, the smartphone industry grew by just 10% in Q4.

And given Nokia's (NOK) blowup this morning, and Research In Motion's (RIMM) back on March 29, that number could easily be north of 90% for the first quarter of 2012. Even the former Android highfliers HTC and Motorola (MMI) have seen their sales go straight down the toilet, and of course, we can't forget that Samsung is not just a smartphone/tablet maker; it is also a major mobile-semiconductor maker and often uses its own chips.

So to play devil's advocate in the face of widespread defense of Qualcomm this morning, I'll say this: While 3G/4G adoption is quite strong right now, there is no rising industry tide because not everyone can sell significant units into Apple and Samsung. And if Qualcomm is in fact shedding some business because of insufficient supply, there's no guarantee that the business comes back when the supply actually is there.

I don't think Qualcomm is on the brink of disaster -- but it doesn't appear to be on the edge of glory, either.

Going into the quarter, I was getting a very strong feeling that I was set to miss a very strong move to the upside, and I consider it sheer luck more than anything that I didn't hit the buy button.

However, I don't consider the decline a buying opportunity because I think increasing investor worries over competition offset the favorable supply-demand dynamics.

Thus, we have a wash, leaving this guy on the oh-so-safe sidelines with Qualcomm.

Furthermore, I think increasing investor uncertainty sets the stock up for an enormous move on the next earnings report, and I just don't have the confidence to pick a side yet.

Read more:

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To: BDAZZ who wrote (111250)4/19/2012 12:46:59 PM
From: waitwatchwander
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Of course not !!!!

At that time, they (not we) knew that Mirsasol worked well in a tablet format and, given it needed to be front light in order to be useful everywhere, they also knew it wasn't quite as efficient a display solution as they were touting in saving battery capacity.

Qualcomm doesn't necessarily need a big fab to help sort out the bumps and grinds of new and lower processor technologies. However, they likely do need total control over it's operation to move at their pace rather than that of their partners who have to juggle everybody's interest. With that knowledge (shared with manufacturing partners), they are more likely to be first out of the gate. As Mirasol demonstrated, building and efficiently operating a fab is a stepped process. From a comptetive standpoint, the closer Qualcomm gets to these steps, the better off (and partner) they will become. Qualcomm likely does have folks living at the TSMC fab but those folks would have to be dancing to the music of TSMC.

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To: Jim Mullens who wrote (111240)4/19/2012 12:52:56 PM
1 Recommendation   of 145520

Let's pun it this way. As of last night Intel has a much better chip in this game.

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To: Bill Wolf who wrote (111241)4/19/2012 12:55:10 PM
1 Recommendation   of 145520
More of the Lumia effect.

>> Nokia CEO to 'Deeply' Discount Lumia Phones <<

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To: Bill Wolf who wrote (111241)4/19/2012 1:26:51 PM
From: waitwatchwander
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---> strategy is to drive the prices of our Lumia devices deeply down

These phones won't have chipsets built upon state-of-the-art fab processes. This strategy dictates high volume manufacture. I would guess that a lot of the increase in MSM chipsets shipments this year are being sent in this direction and also into the hands of those who wish to compete against Nokia for the same market.

I don't know a lot about fabs but do suspect they operate in a linear manner which gets duplicated to obtain capacity. It is only the perfection of a fab line that Qualcomm needs to address. Once that is done, the knowledge should be easily transferred to the likes of the volume fab operators. I may be out-to-lunch here but don't hear anyone else piping in. Spending a billion on a chipset facility like that in San Jose makes sense to me and it is more than likely to speed up governement approval of repatriation of foreign profit holdings. I suspect a big issue is not just wafer manufacture but also packaging and then one would have to deal with a whole other bunch of intellectual propery rights. Nothing is ever simple.

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To: waitwatchwander who wrote (111255)4/19/2012 1:35:40 PM
2 Recommendations   of 145520
A modern 28nm fully equipped fab would be an investment of $5 billion. They would also have to purchase and license process know how from an established player. It would take at least 18-24 months to build and fully ramp. It is not really feasible.

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