Qualcom Lovefest>
From the November 8, 1999, issue of Wireless Week
Qualcomm Up, But Puzzling
By Monica Alleven
The great Qualcomm lovefest, justified or not, reached a new high early last week after the San Diego vendor raised revenue
expectations and set a 4-for-1 stock split.
"Qualcommites"--the smarties who invested in Qualcomm stock a long time ago--rejoiced. Internet message boards oozed with
pats
on the back for the self-described "Quillionaires" watching their money grow. Postings affectionately referred to Qualcomm
Chairman and CEO Irwin Jacobs as "Dr. J" and cheered "Go Qualcomm!" Those who didn't own the stock, which has surged
more than 10-fold this year, wondered what the heck was going on when the stock hit $280 and beyond.
Qualcomm supplies CDMA chip sets and collects royalties from companies that use its technology, but does that justify pushing
Qualcomm's stock up more than $35 in one day? Qualcomm, after all, is focused on CDMA technology, not the other predominant
standard known as GSM, and while Qualcomm's new wireless Internet may sound like a great idea, the company still has to
deliver on it--and soon. Jacobs says the technology will compete with digital subscriber line and cable modems, two areas that
already are starting to take off commercially.
But those who favor the controversial stock say the uptick is more than justified. "The chips aren't pieces of silicon," says Pete
Peterson, analyst at Volpe Brown Whelan & Co. with a "buy" rating on the stock. "In this case, the chips are a unique set of
software that's patented and that's going to be required by the world."
Analysts like Peterson envision a future in which a reconfigured Qualcomm leads the industry into the next frontier of advanced
wireless voice and data technology. Service providers will migrate toward more advanced technologies that are based on CDMA,
giving Qualcomm even more royalties.
Even before that happens, however, Qualcomm is looking good. Its earnings in the last quarter, at 91 cents per share, were
awesome, and the company expects first-quarter profit will be even better. Revenue for the past fiscal year soared to $3.9 billion,
up 18 percent. Royalties increased from 6 percent of revenue last year to 11 percent of revenue this year.
Other factors also contributed to the Qualcomm stock frenzy last week. Part of it involved "shorts," investors who bet a stock will
go down and, upon a rise, act quickly to cover themselves before they lose even more. A rising stock also piques the interest of
speculators and long-term investors. And the financial results Qualcomm released last week gave analysts a clearer picture of
how the company will look once it sells the handset division, which hurts overall profits. That division could be sold by year's end.
Now some analysts have upped their price targets over the $300 mark. Qualcomm's board will vote on the stock split Dec. 20.
Once approved, more smaller investors will be able to join in the Qualcomm lovefest.
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