Qualcomm Executives Start Acquiring
Shares Again, Signaling Bullish Hopes
By LAURA SAUNDERS EGODIGWE
Staff Reporter of THE WALL STREET JOURNAL
Qualcomm Inc. insiders seem to think there is even more room for their supersonic stock to soar.
Until recently, executives at the San Diego wireless-communications company had been taking profits by exercising options and selling the underlying stock. Who could blame them? Qualcomm shares rocketed 2,619% in 1999. Indeed, insiders sold 12.4 million shares last year.
Qualcomm's liftoff began after the company resolved a patent suit with Telefon AB L.M. Ericsson of Sweden over its digital wireless technology, called code division multiple access, or CDMA. In January 1999, Qualcomm traded at a mere $6.48, adjusted for stock splits. By the end of December, it was at $176.125. Tuesday, Qualcomm was down $3.9375 in 4 p.m. trading on the Nasdaq Stock Market at $130.5625.
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In January, with the high-octane stock almost 30% off last year's highs, three insiders accumulated 648,000 shares by options exercise. The executives exercised nonqualified options, which means they incurred a tax liability on the difference between the exercise price and Qualcomm's market price on the day of the exercise. If the shares fall, they still owe taxes figured on the market price on the day of the exercise.
The transactions perked up the ears of insider-data analysts. "Insiders tend to exercise [nonqualified stock options] when they think the stock is heading higher," says Bob Gabele, director of research, First Call/Thomson Financial, which follows insider transactions. "These insiders' assumption of risk implies that there is less likelihood of company news that will cause the stock to drop."
On Jan. 31, Qualcomm President and Chief Operating Officer Richard Sulpizio exercised options to acquire 96,000 shares. Marc Stern, a director, exercised options for 480,000 shares, and Steven Altman, general counsel and general manager, technology transfer and strategic alliances, acquired 72,000 shares by options exercise.
In the past, Messrs. Sulpizio and Altman sold the shares acquired by exercising options. Mr. Stern's options exercise was his first since becoming a member of Qualcomm's board in 1994. Qualcomm doesn't comment on its executives' personal transactions, a company spokeswoman said.
However, some read the actions as a bullish signal. "I think it's a good sign that they feel good about the company's prospects despite the fact that the stock has risen dramatically," says Jeff Van Harte, a senior portfolio manager at Transamerica. The company began buying Qualcomm shares last October at around $50 and holds 2.7 million Qualcomm shares in its various mutual funds and institutional accounts. The stake is valued at about $350 million now.
There could be even more smiling Qualcomm investors in the future, if insider-data analysts are right. When stocks pull back like Qualcomm has, "insiders either stop selling or accumulate, typically through stock option exercise," says Craig Columbus, president of the InsiderScores.com Web site. "That's often a very good sign that another leg of momentum is coming."
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