Qualcomm steady after mixed reports
March 29, 2001 02:10 PM ET
by Rex Crum
For more than a year, wireless technology
developer Qualcomm (QCOM) has often
been prone to wild stock-market swings
due to the state of the Chinese
mobile-phone market.
Today, however, Qualcomm shares
remained fairly stable despite an
announcement from one of China's largest
telecoms and a somewhat negative report
by CIBC World Markets.
Qualcomm shares fell 1.9 percent in
afternoon trading following a report late Wednesday that said China
Unicom Group (CHU) would invest almost $8.5 billion in the
company's CDMA mobile phone network. While Qualcomm would
not be building the network, the company holds several licensing
patents on the wireless technology and earns royalties any time
another company uses CDMA.
Accepting bids
Chinese news agencies have reported that 12 companies have been
invited to bid on infrastructure contracts for China Unicom's mobile
network. Among the companies said to be involved in the bidding
are Lucent Technologies (LU), Nortel Networks (NT), Ericsson
and Motorola (MOT).
China Unicom will reportedly spend the money over three years to
build out the mobile phone network across 300 cities. The company
has set a target of 13.3 million customers this year and estimates it
can add 10 million customers a year.
However, Qualcomm's prospects for long-term growth in the
Chinese market were not enough to keep CIBC World Markets from
remaining skeptical in the near term, and the brokerage house
lowered its 2001 and 2002 earnings and revenue estimates for
Qualcomm.
Dale Pfau, a CIBC analyst, dropped the company's 2001 targets on
Qualcomm from earnings of $1.26 to $1.20 a share and revenue
from $3 billion to $2.9 billion, and 2002 earnings figures from $1.73
to $1.57 a share and revenue from $4.3 billion to $3.9 billion.
The consensus of analysts surveyed by First Call/Thomson
Financial has Qualcomm earning $1.26 a share for 2001 and $1.65
a share for 2002.
Pfau said that based on what he called "the technology recession,"
the chances are slim that Qualcomm will hit its estimates of 90
million CDMA phones for the year. If those numbers don't come in,
the company could see a sharp drop-off in licensing royalties.
"Even if Unicom does something, it won't affect Qualcomm's
earnings for some time," Pfau said. "Everyone else has warned and
[earnings and revenue] numbers are down. It's hard to imagine
Qualcomm not feeling some impact."
Company's future
However, Pfau said that he does expect Qualcomm to meet its
current earnings estimates of 29 cents a share for the quarter
ending March 31 and still gives the stock a "strong buy" rating.
Pfau also maintained a 12-to-18 month target of $110 a share on
Qualcomm's stock.
"The basic point is wireless is a tremendous opportunity, but for the
near term, Qualcomm has some issues," Pfau said.
Qualcomm's shares were down 1.94 percent, or $1.06, at $53.75 in
late trading -- about 67 percent off its 52-week high of $162.56 on
March 29, 2000.
The stock has been one of the most volatile for more than a year,
reaching as high as $736 a share on Dec. 30, 1999, one day before
a 4-for-1 stock split.
Rex Crum is a reporter at Upside.com covering telecom,
broadband and wireless. If you would like to submit a letter to
the editor regarding this story, email online@upside.com |
