From the San Diego Tribune....I dont think anyone can ever accuse Mark Roberts (First Union) of not being bullish <g>.
Qualcomm splits its shares 4-for-1
Company's stock value has never been so high
By Mike Drummond
STAFF WRITER
December 21, 1999
Qualcomm shareholders approved the company's first 4-for-1 stock split
yesterday, as officials issued 3 billion common shares to seed the market with
certificates now worth more than their weight in gold.
Wall Street, which has rewarded the company with ever-rising stock valuation
all year, disregarded the potential dilution effect of having so many shares
outstanding. Instead, investors showed their pleasure as the telecom closed
yesterday at $466.811/4, another all-time record.
By month's end, the company will mail stock certificates representing three
additional shares for each share owned to all stockholders of record at the
close of business yesterday.
The company, which began trading on the Nasdaq stock market in December
1991, has initiated three stock splits.
At no time in the company's history, however, has its stock value approached
current levels. Even in an era of profitless Internet companies with multi-billion
dollar market valuations, Qualcomm's performance is turning heads.
"Is it over-valued?" avers one analyst who requested anonymity. "It's gotten to
that point."
Growing wireless market
Still, unlike many public Internet companies, Qualcomm actually shows
revenues and reports profits. Plus, its technology is and will continue to be in
high demand.
Led by the strong global demand for mobile communications, the number of
cellular and PCS subscribers is forecast to reach 1.3 billion in 2004,
according to Strategies Unlimited, a Silicon Valley research firm. Annual
handset demand is projected to grow from 240 million units in 1999 to 600
million in 2004.
Given the hunger for wireless phones and the expectations that people will
yearn for wireless access to the Internet, some say Qualcomm's stock is a
bargain even as it approaches $500 a share.
Even once-skeptical observers note that Qualcomm's code division multiple
access or CDMA wireless technology is better for voice and data delivery
than the two other, older wireless technologies in use today -- global system
for mobile communications or GSM, and time division multiple access or
TDMA.
Huge CDMA potential
Some envision the day when nearly all cell phones will be using some type of
CDMA technology.
"There is the very real possibility . . . where Qualcomm will take a royalty
(payment) on nearly every piece of wireless equipment sold in the world,"
says Mark Roberts of First Union Securities.
He and others also say that if China adopts a nationwide rollout of CDMA,
Qualcomm's stock would still be undervalued, even though the shares have
risen some 1,700 percent this year.
"China has the potential to be a huge opportunity for Qualcomm," Roberts
says. "If we knew for sure there was going to be nationwide rollout of CDMA
in China, you could double subscriber rate for CDMA. Arguably,
everybody's estimates could be low by a factor of two at least."
Meanwhile, investors and some 2,500 employees at Qualcomm and
Qualcomm Personal Electronics are waiting for the company to announce a
buyer of its phone-making division. That announcement might come this week
or after Jan. 1, some predict. Next week is probably out because many in the
investment community will be on vacation between Christmas and New
Year's, which would diminish the transaction's visibility and expected stock
boost.
That stock boost would get an even bigger lift if Motorola or Nokia -- a
rumored front-runner -- buy Qualcomm's handset business, says Brian
Modoff, an analyst with BT Alex. Brown.
Nokia and Motorola are the world's No. 1 and No. 2 phone makers, in that
order. And they make their own chipsets -- the semiconductor or brains
inside mobile phones. If Qualcomm sells the business to either, and constructs
the deal to supply the chips for those phones, it could entrench its CDMA
market share, which today hovers above 90 percent.
"If it's not these two," Modoff cautions, "Qualcomm's (chipset) market share
could drop below 50 percent. These two companies typically gain 20 percent
of any market they target."
To be sure, any number of pitfalls could hit Qualcomm and its mesmerizing
stock performance, from technological glitches to global economic swoons.
"There's a bubble that will burst sooner or later," SG Cowen analyst Wojtek
Uzdelewicz says of the raging bull market.
He notes, however, that investors enjoy Qualcomm's position in relation to the
future of wireless technology.
"People are looking at comparisons, not the company's cash flow or anything
like that," he adds. "Qualcomm from this perspective could be a $600 stock,
$700 -- you pick the number." |
