Qualcomm's All Over the Yard,
Again
By Bill Mann (TMF Otter)
June 26, 2000
Summary: Qualcomm's had the best of times and the worst of times over
the last two weeks. China is on-again off-again (not really), Nokia's gonna
buy Qualcomm (not really), and Nokia is going to use Qualcomm chips
(yes, really).
Market drama-queen Qualcomm (Nasdaq: QCOM) has danced all over the yard
over the past two weeks as good news, bad news, rumor and insinuation send its
stock price up, down, back up, and then down again. What's been troubling has
been that it's seemed every time one of the business events came out,
Qualcomm's stock seemed to run the opposite direction.
As I have said several times before, this company's unwillingness under most
circumstances to manage its shareholders' expectations is likely going to keep it
beholden to the unreasonable moves and self-fulfilling prophesies of the
momentum investors. And that's too bad.
In the last several days, the company's newswire has read like the story line for
Melrose Place. First came the ill-hidden secret that the company's partner in
China, China Unicom (NYSE: CHU) was going to forego the current generation
Qualcomm wireless produces, followed almost immediately by signs of slowing
growth in the South Korean market, the largest for Qualcomm-enabled
Code-Division Multiple Access (CDMA) networks. Anthony Thornley, Qualcomm's
CFO, publicly announced that a bankruptcy by troubled Globalstar (Nasdaq:
GSTRF) , owned 6.4% by Qualcomm, would impact its bottom line by about $0.10
per share.
Then came other events: handset Rule Maker and NOW 50 company Nokia
(NYSE: NOK) made a huge concession to Qualcomm by announcing that it would
buy CDMA-enabled chipsets from South Korea's Telson Electronics. Telson has a
pre-existing agreement with Qualcomm for chips for CDMA. As such, Nokia is
stepping partially away from its own troubled CDMA products and outsourcing
though a specialty supplier, ending its vow to use internally produced chipsets for
CDMA. Finally, rumor came out at the end of the week that Nokia would be buying
Qualcomm, a move that on the surface would make absolutely no sense, and even
less so with some cursory research.
The outcome? Qualcomm ran up and down, and ended last week almost where it
started. This is just an unfortunate by-product of a company that has taken on
religious status for its proponents (including some Wise analysts who made their
mark predicting its run last year), and that of a demon to its critics and
competitors. You've got a better chance solving Northern Ireland's problems than
successfully arguing that the truth lies somewhere in the middle.
What is curious is that Qualcomm, with its propensity to run up and down, did not
move up much upon the news that Nokia is going to be buying its chips. There are
several potential answers for this, none of them great. First, Qualcomm's run up
late last year was SO overdone, that now, 70% off the high, it is still overvalued.
Second, the news of slowing sales in Korea has tempered the positive potential of
Nokia coming on board. Both of these are kind of "you get what you ask for"
arguments. They are essentially saying that Qualcomm was worth more as a
mysterious "story-stock" than it is as one with real world revenues, operations,
and problems.
The end news is that Nokia's decision is really good for both Qualcomm and Nokia.
We can expect closer cooperation between the two as time goes by, and wireless
markets such as Korea will take their appropriate place in the overall global
perspective.
Your Turn: Post your thoughts on the Nokia/Qualcomm cooperation and other
developments on the Qualcomm Discussion Board
Next Steps: |
