Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 176.12

-1.8%

Dec 16 3:59 PM EST

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To: MileHigh who wrote (41111)	9/14/1999 9:58:00 PM
From: Jenne	Read Replies (1) of 152472

WIRELESS Based on current performance in each of its business units, Qualcomm (QCOM) announced today that fourth fiscal quarter earnings from operations will meet or exceed analyst consensus estimates of $.87 per share. The company also stated that it is considering several strategic options for its handset business. Qualcomm stated that discussions are underway with a number of companies that have expressed interest and it hopes to complete discussions and enter an agreement before the end of the calendar year.. COMMENT: In recent weeks, the market has been concerned that shortages in component supplies and a potential price war in telephone handsets could limit Qualcomm's ability to beat fourth quarter earnings targets. However, because chipsets and royalties generate more than 75% of the company's profits, a price war in the handset business can actually be good for Qualcomm. More than 60 CDMA gear manufacturers pay royalties to Qualcomm, including market leader and The Wireless Investor favorite, Sprint PCS. Because Qualcomm will receive a royalty with each CDMA handset sold, Qualcomm's slice of the wireless pie will grow larger as the market expands. It's rather simple--more CDMA handsets sold, more royalties to Qualcomm, more gains for Qualcomm shareholders. Qualcomm's news that it is in strategic discussions regarding its handset business is also a positive. Rumors that the company might eventually exit the handset market entirely have been widespread for months. The company originally entered the handset business to drive adoption of CDMA, which has done spectacularly well so far. With new entrants such as Nokia (NOK) now in this competitive market, Qualcomm's ample resources are better spent elsewhere. With some analysts expecting Qualcomm's net earnings to grow 50% compounded annually for 5 years and a current price/earnings ration of 43, the stock can be viewed as cheap.

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