The following is alleged to be from a Morgan Stanley report on Qualcomm. I picked it up on another board, and since there was no link, can't vouch for its authenticity, but find it interesting in light of the recent dip in Q's valuation:
What is a Nickel of Lost Upside in 2003 Worth?
Summary and Investment Conclusion
Confusion creates buying opportunity in QCOM. Nextel hopes to enhance its sole-sourced IDEN network with a software boost from Motorola. This announcement led some investors to believe Nextel is abandoning its work on CDMA2000, a significantly more advanced and efficient technology than IDEN. We believe Nextel remains very involved with CDMA and we don't see any change to our estimates on Qualcomm. Nextel never provided an anticipated launch date so our model never incorporated any revenue from Nextel?s network.
Instead, we have positioned Nextel?s plans as a source of potential upside for Qualcomm should Nextel announce more details about their timing. So what is this lost upside worth? We estimate if Nextel had 2 million CDMA subscribers in C2003 the deployment of infrastructure and handsets would have generated about $0.05 in EPS for Qualcomm. Given the Philadelphia Semiconductor Index (SOX) is up 14% in the last two days and QCOM is down 8%, the relative performance of QCOM over a nickel of lost upside in 2003 is excessive, in our opinion. This is especially true when you consider the CDMA2000 opportunity for Qualcomm at Nextel remains on the table in the mid to long term.
"CDMA is the Only Logical Path"
Recent conversations with Nextel and other sources support our view a mid to long term opportunity remains for Qualcomm at Nextel. Nextel has publicly stated that "CDMA2000 is their only logical path.? Nextel continues to believe the availability, the spectrum efficiency and the narrow spectral footprint (1.5Mhz versus 5Mhz) of CDMA2000 represent significant advantages relative to other standards. Other contacts have reported to us that Nextel intends to assign a portion of its spectrum for CDMA2000 at an unspecified date. Nextel admits they have requested and received multiple proposals for building a CDMA2000 network.
Given the precipitous drop in NXTL, we believe it is prudent for Nextel to remind investors that it will manage the transformation to an advanced wireless network in a way that will minimize execution risk and financial strain. For example, investors should not have ever expected Nextel to replace its entire IDEN network and install CDMA2000 in one big upgrade. Our checks indicate Nextel is still leaning heavily towards CDMA2000 as its advanced technology, but it is likely to be implemented in phases, over multiple years, and in parallel to its ?enhanced? IDEN network. If Nextel and Motorola are successful in enhancing the TDMA based IDEN standard; this will facilitate a manageable transformation for the corporation to an advanced technology like CDMA2000. With no visibility into timing of the move to CDMA2000, we still have no reason to incorporate Nextel revenue into our estimates.
Are There Dots to Connect? We don?t believe there are dots to connect between the Nextel news and the recent announcement of a 2-quarter delay in deploying CDMA2000 1x by Japanese service provider KDDI. With more than 1 million CDMA2000 1x subscribers in South Korea to date, it is clear the standard is ready for mass deployment. We believe KDDI?s delays can be traced back to some unique characteristics of the company?s infrastructure and network software. Nextel?s decision may be related to the precipitous drop in their stock price and Motorola?s willingness to commit to a stopgap advance in IDEN technology.
Announces WCDMA 3G Chipset Availability
In November of 2000, Qualcomm announced its intention to expand its presence in the market for 3rd Generation (3G) cellular phone chipsets by announcing a family of devices to address what is currently expected to be the largest segment of the 3G market; Wideband CDMA (WCDMA). Qualcomm already addresses the other major segment of the 3G market with its CDMA2000 products and roadmap. On October 4th Qualcomm announced the availability of its 3G Wideband CDMA (WCDMA) chipset and system software that enables handset manufacturers to develop phones for UMTS 3G build-outs around the world. The launch of the MSM5200 chipset heralds Qualcomm's much anticipated entry into the WCDMA market, and effectively expands the company's market opportunity to encompass the entire worldwide 3G cellular/PCS handset market. The MSM5200 will enable handsets with data transmission rates up to 384Kbps and offer a wide variety of integrated functions. We believe that Samsung has handsets utilizing Qualcomm's MSM5200 chipset well underway. We believe that Qualcomm is the only semiconductor supplier to offer a complete 3G standard product cellular solution to handset designers.
As a reminder, we have eliminted all WCDMA related revenue and royalties from our estimates for Qualcomm through the end of C2002 due to our belief WCDMA deployment will not begin in earnest until late C2003/early C2004. >>>
