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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 179.49+2.0%11:38 AM EST
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To: MileHigh who wrote (66556)2/12/2000 12:34:00 PM
From: Webster  Read Replies (2) of 152472
 
Mile High regarding your comment..."CFO said Operating expenses might actually rise this Qtr as a % of Rev even after the sale to KYO. Go figure".

I listened to the CC and there was some confusion over this statement. Tony Thornley said that operating expenses in real dollars would be reduced, although qcom would continue to increase investment in ASICS R&D, and that Ops Exp as a percentage of revenue would be higher.

With the future reduction of HS revenue it is very logical that ops expenses could be reduced in real dollars and rise as a percentage of revenue. Q's Operating expenses last qrt were $184 million on approx $1.1 Bil revenue or about 17% of revenue. Handset revenue was $442 mil.

For example it is possible for qcom to increase its spending one one area (Asics R&D), reduce expenses in another area (Handset R&D) and still have a net reduction of ops expenses (perhaps as much as $34 mil in Q2 to $154 Mil).

If qcom's revenue for Q2 is $442 mil lower it would generate about $658 mil in revenue, 150 mil in ops exp which is about 22% of revenue.

Qcom's net income margins for Q2 will rise and the real eye-opener regarding their earning power will be in the June quarter as Net income margins begin to trend towards 40%. I do think that q's Q2 income will be around $.27 maybe $.28, because management has said so. There are too many other things going on to keep q's earnings from growing 50% annually. FWIW.
Thanks
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