London Day- First take-
1. Dr I Jacobs-
a. CDMA vs Non-CDMA handset growth 2003 thru 2007 CAGR
....Yankee Group 3Q’03- CDMA 38%, Non-CDMA (13.4%)
....EMC 11/03- CDMA 38%, Non CDMA 2%
Seems to me the CDMA market is where the action is- I think most of us Qualcommers have realized this for some time.
b. CDMA2000 1xEV-DV Rev D- Qualcomm is very active in developing technology.
c. RAPTOR – using user phones to monitor network performance
2. Tony Thornley
a. Worldwide 3G CDMA sub evolution forecast-Strategy Analytics 4/03-
......2008- CDMA 360M, WCDMA 340M, total 700M
b. WCDMA incremental growth opportunities- 2006 WCDMA handset forecast
TT- Q’s 2004 guidance at 15M h/s, 20 cum subs. “ Most analysts moving up WCDMA sub forecast”???
..................................Today.............Spring ‘03
.........Yankee 7/03......156M..............164M
..........EMC 10/03.........92**................92
..........Ovum 7/03.........59.....................61
..........IDC 9/30............59
..........Gartner 10/03.....54....................70
..........Instat 3/03...........22
..........Per an AT&T wireless briefing and a 3G Americas PR, EMC (6/03) forecasted total WCDMA subs at 27M in 2007. Seems odd EMC is now forecasting 92M WCDMA handsets sold in 2006.
c. CDMA 450- Many launches announced and devices announced/ under development
d. Key priority to develop low end phones- Now at $80, future to be lower
3. Dr. P Jacobs
a. Omni Tracks/ tracking solutions-
....1/2 hasmat shipments using Q solutions
.....Construction equip market 10X long haul trucking. Trailer track terrestrial system based.
b.. Handset ASPs down only 2% in 2003
c. Qchat release A based, BREWchat not release A based (3 BREWchat phones)
d. Samsung M400 (EV-DO) has more computing power/speed than ’98 pentium.
e. Camera phone reach 25M in 2 years, vs Digital camera standalones at 20M in 9 years
f. 8 of 10 top CDMA operators have chosen BREW
g. A-GPS handset base to grow to 280M in 2008.
h. Interesting chart- Market Share Changes as Technology Evolves to CDMA
....AMPS- 2 major vendors
....TDMA- 3 major vendors
...GMS 2Q03- 5 major vendors
...CDMA 2Q03- 7 major vendors: Samsung, LG, Mot, Kyocera, NOK, Audiovox (Toshiba), Sanyo
i. PTT enabled handset sales forecast- 88M in 2008.
4. S. Altman-
a. Exhaustive summary of Q’s strong patent position including FAQs-
b. License based on using any claim (avg 30 / patent)in any of over 3K patents
c. Royalties will be collected as long as CDMA products are sold.
d. IPR covers CDMA/ WCDMA/ TD-SCDMA.
e. Same rate for licensee irregardless of CDMA standard.
Percentage of ASP of product, maximum amount but seldom reached.
f. 85 Licensee’s reporting CDMA royalties, 20 of which are WCDMA
5. Dr. S Jha
a. Extensive MSM road map chart by segment tier/ features, modes and sample dates.
......16 MSM, 10 of which are dual mode
.......EDGE was mentioned as being supported
b. 2M pixel camera supported in 2004, 4M in 2005
c. Chart stressing “Path to success in WCDMA”
.......3G handset complexity has increased expotentially
.......Industry’s most experienced CDMA testing and network deployment team
.......Investing significantly increased in WCDMA R&D/ so as to profit later
d. Higher integration of components on MSM chipset (MSM6250)
........Video ASIC, Ringer ASIC, 3D Gaming ASIC, Apps co- processor, Camera Module w/DSP
e. Interesting chart comparing NOK/TI baseband device (2h’03 sample?) with Q’s MSM6500 (sampled 2Q03)
...................................NOK/TI.......................MSM6500
Processor/ DSP..........ARM7..........................ARM926e
Modems Integ............CDMA20001x.............CDMA20001x, EV-DO w/Rx diversity
.........................................................................GSM/GPRS class 10, GPS
Memory....................8Mbit inted SCRAM.....16kB instructon and data cache each
..................................................................................Support NOR, NAND LP_SDRAM, PSRAM
Features integ............1x Voice and data..........1.3Mpix camera, MPEG4, graphics accel, USB-OTH,
.........................................................................72 polyphony syn, MMC, SD, Bluetooth, voice,
.........................................................................data at 1.2Mbits/ sec
f. WCDMA will be a pivotal year
6. B Keitel
a. 2003- Record year
......$1.6B in Free Cash Flow
......$6.5B in Cash forecast for 2004 ye, $5.4B 2003 ye, Increase $1.1B
b. Strategy unchanged-
Lead in technology, time to market, total solutions, segmentation
c. Significant increase in R&D for ’03 and ‘04
.........2004 R&D (SG&A) to increase 18-20% over 2003 avg
d. Phone ASPs mostly flat over last 3 years- $194, $193, $190
.......forecasting 8% decline in 2004
e. Outstanding commitments reduced to $265M as of Nov 6 wlth Ericsson expiration.
f. Net cash investment (QSI) for 2004 at $250M
g. Extensive discussion on strength of Free Cash Flow position vs the industry.
h. Added “color” to 2004 guidance –
h.1. Handset Shipments
.......................2003............2004
...........................................Q 11/12.....Jim Est w/ additions
WCDMA
..Europe...............1..............6M
..ROW.................3..............9
..s/total.................4............15
ROW...................2..............4
Latin Amer........10............10
N. Amer.............46...........46**........56M..***
India.....................8...........11**........22M
China..................10...........15
Asia Bal.............27............31
Total.................107..........133..........154
** stated that estimates exclude Impact of unified license (India) and number portability (U.S.- Korea/Japan?). Stated Reliance goal is 25M subs by 2004 ye, plus other carriers would no doubt follow suit.
*** B Kietel mentioned the forecast for N America assumed declining replacement rates, yet P Jacobs presented a chart showing replacement raising for PCS- Another potential upwards adjustment.
It should be noted that the Q did not include any GSM1X sales or discuss in any detail. Perhaps in presenting annual guidance with the new govt regulations (Sarbanes/Oxley) it is prudent not to forecast what is not almost a “slam dunk”.
k. Revenues (excl QSI) 5 – 9% increase
........In order to balance the revenue increase of 7% (MP) against the handset increase of 24% and handset ASP decrease of 8%, additional decreases totaling 9 % are required.
............................................2003...................2004
Handset sales.......................107.....................233....24%
Handset ASP declines..............................................(8)%
Other decreases........................................................(9)%
...Chipset ASP
...Chipset Market Share
Net........................................................................... 7%
Revenues
...Guidance....................$3.846B............$4.115B 7%
l. Total EPS including QSI increases to $1.23 vs $1.01 and closed the GAAP gap to $.20 vs $.41.
7. J Jacobs-
a. China 1.3B population, 250M current subs, potential subs (5yrs) 495-665M, 3G at 40%(198-266M)
a.1.. China- Sim cards plus handset sales equal 13M added subs in 2003. Approx 3M sim cards used on CDMA network along with grey market phones
b. India 1.1B population, 25M current subs, 220M potential subs + growing as handset prices decline and GDP increases
b.1. 6.6M CDMA subs end of September, growing at 25-40K/day. 8- 10 M CDMA subs by 2003 ye.
b.2.. Reliance with universal license goal at 25M subs by 2004 ye
..............Curr Subs......Circles Lic...........CDMA Capacity
Reliance.....5.0M............17.........................20M
MTNL..............................2
BSNL.........0.6M
TATA.........0.8M.............6 +11 applied.........7M- with RFP for additional lines
c. Brazil- 182M population with 40M potential subs
d. North America wireless penetration
...............................2003...........2004 est..........potential
............U.S................56.3%..........61.9%............71%
............Canada...........46.2.............53.2...............73%
d.1. U.S. cellular customers “very/ extremely” likely to switch in 3 months- ( not in Q’s handset estimates)
.....................Q chart.........Jim Estimate
.........................................Subs June qe....Switch to CDMA Potential
...................................................................Net..................New Phones
Verizon............3.9%..........34.6M............(1.349M)
Sprint................5.5.............15.4................(0.847)
T- Mobile.........6.4..............11.4................ 0.729................0.729
Nextel...............6.5.............11.7.................0.760.................0.760
AWE.................9.2.............21.5................1.978.................1.978
Cingular............9.4.............22.6................2.124..................2.124
Other ................................................................?.........................?
Total..........................................................3.395M..............5.591M
d.2.. PCS quarterly handset replacement rate raising- Q103- 6%, Q2- 7%, Q3- 8%
Rate raising yet the Q is forecasting the 2004 replacement rate in N. America to fall in total?
e. Japan- 80M subs as of Sept 2003 with 20% CDMA. Potential with WCDMA to pick up 64M subs.
f. Korea with 33M CDMA subs and with 1.3M handset sales in October. EV-DO 2003 ye target at 4M, and 8M for 2004. WCDMA to be launched on a limited basis11/12/2003
