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   Technology StocksQualcomm Moderated Thread - please read rules before posting

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To: engineer who wrote (122628)11/3/2014 12:07:18 PM
From: The_Net
   of 183444
Fast forward to Oct 30 from the same author,

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To: engineer who wrote (122649)11/3/2014 1:47:05 PM
From: JeffreyHF
   of 183444
There's still a question of ASP caps on royalties. Do we know whether having Foxconn pay, rather than Apple, actually lowers QTL's revenue?

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To: JeffreyHF who wrote (122652)11/3/2014 1:59:19 PM
From: slacker711
   of 183444
I think that Foxconn's ASP would be below Q's royalty cap.

OTOH, I believe Q has said that contract OEM's have higher royalty rates than the handset vendor.


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To: Jon Koplik who wrote (122646)11/3/2014 1:59:25 PM
1 Recommendation   of 183444
Why do we always hear about Apple? Because they make tons of money. Instead of looking at them as a mobile OS company (as Apple against the rest of the world), look at them as a handset company against other handset companies. Very few enter a store and request an Android OS. They want a Samsung or an LG. I bet 85% have no idea or care what OS runs their phone. If Android had Siri and would auto post to my other devices I wouldn't care. (Wait now Apple pay is great too.) what counts is how does the Apple handset division fair against the handset division of any other company in the world. There isn't a division that wouldn't trade places with Apple in a heartbeat. I think Samsung is number one in units, yet they are struggling and Apple is flying, so what's more important, especially where investment is concerned? When Nok ruled the world they only had 38 percent unit share, not dollar share, and nobody will ever reach that again. (BTW are there any stats as to what percent of the high end market Apple owns.)

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To: The_Net who wrote (122651)11/3/2014 2:33:48 PM
From: engineer
   of 183444
and Broadwell is their i7 processor? Not their LTE and baseband chipset...

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From: qbull11/3/2014 2:34:37 PM
2 Recommendations   of 183444
Qualcomm FYQ4 On Tap: Bulls See Strength in iPhone, China Risk Priced In
Tiernan RayWireless chip titan Qualcomm ( QCOM) reports fiscal Q4 results after the bell this afternoon, the first quarter since the company on July 23rd beat Q3 expectations and raised its year outlook, but also disclosed it is struggling with some vendors in China who are refusing to pay for its technology.This is also the first report since Apple’s ( AAPL) iPhone 6 was introduced last month, using Qualcomm parts, and the first report since a Samsung Electronics ( 005930KS) reported a decline in its Q3 mobile fortunes. Samsung is, like Apple, a major customer of Qualcomm’s.
The company continues to be under investigation by the Chinese government regarding its licensing business, which charges royalties for phones shipped that use technology for which Qualcomm holds patents.

The Street is modeling $7.04 billion in revenue and $1.32 in EPS. The outlook for the current quarter is pegged at $7.39 billion and $1.43.

Diving headfirst into the China issue, CLSA’s Srini Pajjuri reiterates an Outperform rating on Qualcomm stock, and a $90 price target, writing that he has “limited visibility” into China’s investigation, but that “even if we assume that China royalty revenue goes to zero, the stock is trading at 17x, suggesting that a near worst case scenario is priced in.”

Probably, the most prominent China OEMs have no problem with Qualcomm, he speculates: “we believe most top tier original equipment manufacturers (OEMs) in China such as Huawei, Lenovo, Xiaomi, Coolpad, and ZTE are complying.”

Qualcomm, he opines, is unlikely to agree to strip away royalty demands altogether. Rather, “We believe some combination of a lower rate, certain exclusions, and a fine is more likely.”

Probably, about $1 in EPS is at risk from those refusing in China to pay royalties, estimates Pajjuri:

We estimate the total made-in-China smartphone units to be about 640m in 2014. Excluding TD-SCDMA/2G, we believe Qualcomm’s addressable market is about 455m. Management’s CY14 device outlook assumes that the company won’t collect from about 215m devices. At around $8/device, we estimate that royalties from the remaining ~240m devices account for ~25% of QTL’s earnings or about $0.80-0.85 in EPS. For CY15, we believe $1.00 is a reasonable estimate, excluding which the stock is at 17x or 14.5x EV/FCF.

Pajjuri concludes while China is important, there are plenty of other growth areas for Qualcomm, and he doesn’t see a meaningful risk of spill-over into India, for example:

The primary spillover effect is in markets where Chinese manufacturers export to. In particular, Indian brands such as Micromax, Karbonn, and Lava primarily source from Chinese design houses such as Longcheer, Huaqin, and Tianno. We believe design houses are responsible for paying the royalties as Indian brands do not currently have a CDMA license. Of the 7 design houses we track in China, 2 of them do not appear to have a license. We also suspect underreporting is prevalent here as it’s difficult to track exact shipments.

Pajjuri is modeling $6.946 billion in revenue in Q4, and $1.28 in EPS. For the current quarter, he sees $7.492 billion and $1.50 per share.

Elsewhere, Cowen & Co.’s Timothy Arcuri reiterates an Outperform rating, and an $85 price target, writing that the stock “remains in a holding pattern pending NDRC investigation, and CQ4 Samsung inventory clear-out represents some near-term headwind for QCT,” but he still sees “risk- reward skewed to upside and see F2015 guide as likely good enough (despite the various QTL China challenges) given waning QCT concentration risk, solid double- digit TAM growth and a still-weak competitive landscape.”

Arcuri is modeling $7.01 billion and $1.35, based on shipments of 235 million chipsets, which is just above the low end of the 230 million to 245 million forecast the company offered. But, he writes, “we see potential for upside to both QCT units and margins given low bar to hit F2014 margin guidance (>20% exiting the year) and further LTE share gains in the quarter.” For this quarter, revenue may come in at only $7.32 billion, given chipset sales into Apple for the chipset division will be offset by inventory clearance of Samsung devices.

The licensing division may actually see a bright spot in that “we note December will be the first Q where QTL’s TAM guidance reflects the “potential” of China 4G, given China Mobile’s 4G LTE connection growth outpaced 3G TD-SCDMA.”

Also today, Ehud Gelblum with Citigroup reiterates a Buy rating, and an $88 price target, projecting $7.05 billion in revenue and EPS of $1.33, up from his prior estimate of $1.30, helped by “strong 4G uptake at China Mobile in CQ3, along with strong CQ3 growth at Apple.” Those positive trends caused Gelblum to raise his device shipment estimate above Qualcomm’s forecast, to 250 million.

Gelblum cut his estimate for pricing for Qualcomm, but he’s not changing any assumptions about licensing amidst the China stubble:

Our chip ASP falls to $19.2 from $19.6 to reflect the mix shift of lower ASP chips into CM. Our revised est’s also reflect an increase in our China Mobile LTE shipment forecast back to 80M for 2014 vs the 60M we had modeled after weak 4G LTE sub adds at CM in Q2. In Q3, CM 4G subs grew to 41M, an inflection point that we expect to benefit Qualcomm on the chipset side. Our QTL ests are untouched given the current underreporting issues in China.

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To: qbull who wrote (122656)11/3/2014 2:38:23 PM
From: engineer
   of 183444
don't they report after the bell on Wednesday?

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To: engineer who wrote (122657)11/3/2014 2:56:19 PM
From: Humble
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don't they report after the bell on Wednesday? Yes, Barron's corrected it immediately in the web :-)

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To: JeffreyHF who wrote (122652)11/3/2014 3:27:42 PM
From: Jim Mullens
   of 183444
Jeffrey, re: Foxconn vs Apple royalty………………

There's still a question of ASP caps on royalties. Do we know whether having Foxconn pay, rather than Apple, actually lowers QTL's revenue?


Good point. I don’t think we do.

This article provides the iPhone 6 and 6+ BOM detail, $227 / $242 respectively.

Adding 10% for Foxconn’s markup yields 250 to $260. I also recall that in instances where the royalty base was on the 3rd party manufacturer and not the retail seller, the royalty rate was higher. I’m not sure if the cap is $250, $300, or $400.

One other item, QCOM’s device ASP metric in based on Apple’s unsubsidized selling price of $600 -$800 and not Foxconn’s sales price to Apple. This has two affects of the device ASP metric.

1. Using the higher ASP lowers QCOM’s implied royalty rate

2. With ASPs above caps, ($ Apple – Foxconn issue) declining ASPs increase the implied royalty rate.

Alt 1

………………………….Units….ASP….. sales $.......royalty Base…Royalty @ 3.5%

iPhone ASP……………..100….$650…..$ 65,000

Royalty Cap…………………….$260……………….$ 26,000………….$ 910

Other units………………900…..$190….$171,000…..171,000………….$5,985

Total units……………...1,000….$233….$233,000…..197,000………….$6,895

Device ASP/ implied royalty %…$233…………………………………..3.0%

Alt 2

………………………….Units….ASP….. sales $

iPhone ASP……………..100….$600…..$ 60,000

Royalty Cap…………………….$260………………..$ 26,000………….$ 910

Other units………………900…..$190….$171,000…...171,000………….$5,985

Total units……………...1,000….$221….$221,.000....$197,000………….$6,895

Device ASP/ implied royalty % ..$221……………………………………..3.1%

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From: waitwatchwander11/3/2014 4:11:44 PM
11 Recommendations   of 183444
Qualcomm pulls apart LTE radio performance

Facets of performance characterized

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