Qualcomm Shares Fall After Analyst Cuts Forecasts
San Diego, June 14 (Bloomberg) -- Shares of Qualcomm Inc., the best performer on the Standard & Poor's 500 Index last year, fell 13 percent after a Bear, Stearns & Co. analyst cut his earnings forecasts for fiscal 2000 and 2001.
Qualcomm, which makes cell-phone chips and licenses its wireless technology, fell 10 7/8 to 70 1/2. Trading of 41.7 million shares made it the most active U.S. stock. The stock is down 60 percent in 2000, making it the S&P 500's seventh-worst performer this year.
Analyst Wojtek Uzdelewicz said he cut his earnings estimate for Qualcomm by 3 cents or 4 cents a share from $1.08 for the year ending in September, and to $1.30 a share from $1.40 for fiscal 2001. He cited concern about slowing sales in Qualcomm's biggest market, South Korea, where the government recently banned cell- phone discounts.
``There is going to be pressure on the stock for the next few quarters because of earnings uncertainty,'' Uzdelewicz said at the Bear, Stearns technology conference in New York. He said he hasn't changed his ``attractive'' rating on Qualcomm's stock.
Uzdelewicz also cited worries about sales in China and the company's Globalstar satellite-phone venture.
The average fiscal 2001 earnings estimate of analysts polled by First Call/Thomson Financial is $1.42 a share, with forecasts ranging from $1.27 to $1.63. Analysts expect earnings of $1.08 a share in the year ending this September.
Possible Downgrades?
San Diego-based Qualcomm makes chips based on the code division multiple access standard it developed, and collects royalties on sales of CDMA phones. More than 57 million people worldwide use CDMA phones, with about 26 million of those in South Korea.
Chase H&Q analyst Ed Snyder, who rates Qualcomm a ``market perform,'' said the company may warn of lower-than-expected earnings this year if South Korea doesn't reverse the ban on discounts. That could trigger analysts to downgrade Qualcomm and send the shares tumbling as low as the ``high 40s,'' Snyder said.
Qualcomm has stumbled in trying to make its technology more widespread in China. The company reached an agreement in February to license its technology to China United Telecommunications Corp., or Unicom, and Qualcomm said that would lead to a CDMA phone network for 10 million people this year.
Now Unicom says it won't build that network and will instead test Qualcomm's newer cell-phone technology, which can better handle Internet access, for a possible future network.
Globalstar
In addition, Uzdelewicz said Qualcomm executives told him the company expects the Globalstar Telecommunications Ltd. venture to contribute 10 cents a share to Qualcomm's earnings in fiscal 2001.
Globalstar, 40 percent-owned by Loral Space & Communications Ltd., has said phone production delays slowed the introduction of its service. Globalstar, which could run out of cash in four months without more funding, has said it needs to generate $160 million in revenue this year. The company, which began service in October, said it's currently selling service in 40 countries.
Officials at Qualcomm couldn't be immediately reached to comment.
The company has said it shipped 11,000 Globalstar phones in the first quarter, for a total of 40,000.
Separately, Qualcomm Chief Financial Officer Anthony Thornley told investors at the Bear, Stearns conference and yesterday at the CIBC World Markets conference that Qualcomm is developing chips based on the so-called wideband-CDMA standard, a rival to Qualcomm's new cdma2000 technology.
The W-CDMA chips will be available in the third quarter of 2001, Thornley said. South Korea, the biggest market for Qualcomm chips, is considering adopting W-CDMA as the next national cell- phone standard instead of cdma2000.
Jun/14/2000 16:13 ET
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