Qualcomm Expected to Report 4th-Qtr Sales Fell on
Korea Demand
By Scott Lanman
San Diego, Oct. 31 (Bloomberg) -- Qualcomm Inc. will report lower fiscal
fourth-quarter revenue Thursday on reduced demand for the company's
mobile-phone chips in South Korea, Qualcomm's largest market, analysts
said.
Investors are watching to see how much the trouble in South Korea has hurt
sales. Revenue from continuing operations in the period ended Sept. 24 could
fall as much as 11 percent to $639 million, one analyst estimates. Per-share
profit from continuing operations was little changed from a year earlier
because of increased pure-profit royalty revenue, analysts said.
A year ago, Qualcomm's profit was surging on steadily rising revenue from
chips and royalties, and the stock rose more than 27- fold in 1999. As of June
1, the South Korean government banned cellular-phone discounts, slashing
demand for phones there and Qualcomm's chips that run them. Qualcomm's
shares are down 63 percent this year.
``The best-case scenario for Qualcomm would be if we see the beginnings of a
recovery in demand in Korea,'' said First Union Securities analyst Mark
Roberts, who rates the stock a ``strong buy.''
Analysts expect fourth-quarter profit from continuing operations was
unchanged from a year earlier at 24 cents a share, the average estimate
based on a poll by First Call/Thomson Financial. Forecasts range from 22
cents a share to 26 cents.
The 1999 figure includes Qualcomm's money-losing phone-making business,
which was sold to Kyocera Corp. in February. In the fiscal third quarter,
Qualcomm had profit of 27 cents a share before acquisition and stock-option
costs.
San Diego-based Qualcomm will report results Thursday at about 4:30 p.m.
New York time.
Qualcomm shares fell $3.02 to $65.11 on the Nasdaq Stock Market. The
stock is down 67 percent from a record $200 on Jan. 3.
Reduced Forecasts
Qualcomm sells phone chips and gets royalties from licensing its patents for
the code division multiple access standard, used by more than 65 million
people worldwide.
About 26 million of those people are in South Korea. Analysts cut their
revenue and profit forecasts for the third and fourth quarters and fiscal 2001
either after the discount ban or after Qualcomm said it would ship 2 million to
3 million fewer chips in the fiscal fourth quarter than the 15 million in the prior
quarter.
Qualcomm is also expected to detail how it will proceed with its investment in
Globalstar Telecommunications Ltd., the satellite-telephone company that
analysts say is slipping toward bankruptcy. Qualcomm, the second-largest
shareholder of Globalstar behind Loral Space & Communications Ltd., also
makes the bulky phones for the service.
Three analysts' estimates of Qualcomm's fourth-quarter chip revenue range
from $253 million to $275.1 million. That's down from $358.3 million a year
earlier and $338.1 million in the third quarter. License and royalty revenue in
the fourth quarter rose to $171 million to $177.1 million from $147.6 million,
the analysts estimated.
In the wireless systems division, which mainly includes OmniTracs
truck-tracking equipment and Globalstar phones, Roberts estimates revenue
fell to $185 million in the fourth quarter, while Credit Suisse First Boston
analyst Marc Cabi said in a research note he expects revenue of $169.5
million. In the fourth quarter of fiscal 1999, the unit had revenue of $208.6
million.
Including the phone business, net income in the fourth quarter of fiscal 1999
was $136 million, or 18 cents a share. That includes a charge of $34 million to
write off receivables owed to it by a failed Russian phone company. Excluding
those costs and including the phone business, profit was $170 million, or 23
cents a share.
(Teleconference number: 888-849-9216. The call is Thursday at 5:30 p.m. New
York time. The webcast is available through a link at
qualcomm.com. A replay will be available starting at 7:30 p.m. at
800-633-8284, password 16406488, or at {QCOM US TCNI AV }.
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