Mon Nov 5 8:16 PM Qualcomm View on '02 Seen Key to Report
By Ben Berkowitz
LOS ANGELES (Reuters) - Qualcomm Inc. (Nasdaq:QCOM - news), which reports results on Tuesday, is expected to confirm Wall Street expectations that earnings will post double-digit growth in the next four quarters after a stagnant year during which carriers slowed roll-outs of its wireless phone technology.
Analysts said the key to Qualcomm's outlook will be what the company says about the prospects for the deployment of its next generation network technology in the coming months.
The most bearish Wall Street analysts expect Qualcomm to endorse a forecast for earnings growth of single-digit percentage gains for this fiscal year on the view that the slowdown in telecommunications investment will run longer than most think.
Qualcomm is expected to report pro forma earnings of 25 cents per share for the fiscal fourth quarter, up from 22 cents in the third quarter and flat with the year-earlier period, according to research firm Thomson Financial/First Call, which tracks earnings data. Revenue is expected to be around $692 million, ahead of $640 million in the prior quarter and $635 million a year earlier.
``What people are more focused on isn't necessarily this quarter but what is coming up,'' said Keith Bachman, an analyst at ABN Amro.
In a research note issued on Monday, Bear Stearns said Qualcomm shares, which have fallen 35 percent this year had already discounted lowered fiscal 2002 earnings estimates.
Since analysts began cutting those estimates in early October, the First Call average has fallen to $1.22 from $1.33 while Qualcomm shares have rallied in line with a recovery in the Nasdaq.
GUIDANCE THE ISSUE
At Monday's stock price, Qualcomm traded at a multiple of 43 times estimated earnings per share, rich compared with a multiple of 22 times for the S&P 500 but near a historic low for a company that had seen triple digit earnings growth in the late 1990s.
Lehman Brothers analyst Tim Luke said on Monday he expected the company to report fourth-quarter earnings in-line with forecasts, but cut his view for the first quarter and 2002. Luke cut his earnings per share estimate for the current quarter to 25 cents from 26 cents and for the fiscal year to $1.11 from $1.17.
``Guidance is going to be the bigger issue,'' said Brian Modoff, an analyst at Deutsche Banc Alex. Brown.
Modoff, whose fiscal 2002 earnings per share estimate is $1.11 -- near the low end of the Wall Street range -- said he believed estimates for 2002 remained too high and needed to come down.
The First Call average estimate of 19 brokers is for the company to post earnings per share of 27 cents in the current quarter, its fiscal first, with an estimated range of 25 cents to 30 cents.
CDMA (news - web sites) FORECASTS ANTICIPATED
ABN Amro's Bachman said there is evidence that the next generation of Qualcomm's Code Division Multiple Access (CDMA) technology is being rolled out by carriers, but that a reaffirmation from the company would help keep the bears at bay.
``I think the market will respond favorably to confirmation that the CDMA roll-outs are continuing apace,'' he said.
Lehman's Luke said he expects the company to forecast shipments of 15 million CDMA chipsets in the current quarter, over expected shipments of 12.5 million to 13 million in the just-completed fourth quarter.
But that 15 million chips estimate is lower than his previous estimate for shipments of 16 million chips in the quarter.
He also said as many as half of the estimated 85 million to 90 million handsets expected to be sold in calendar 2002 could be equipped with chips on Qualcomm's next-generation CDMA 2000 1x standard.
If 85 million to 90 million handsets are sold in 2002, as Luke predicts, it would represent growth of 21-29 percent over his estimated shipments in 2001 of 70 million units.
Last week wireless infrastructure providers Lucent Technologies Inc. (NYSE:LU - news), Samsung Co. (78020.KS) and Ericsson (news - web sites) (ERICb.ST) told Reuters at the CDMA Americas Congress trade show in San Diego that U.S. carriers had not delayed CDMA 2000 upgrade plans in the wake of the Sept. 11 attacks.
Qualcomm owns all of the relevant patents to CDMA technology, which is the dominant standard in the U.S. and is gaining ground worldwide. CDMA 2000 offers higher voice capacity and maximum data rates in excess of 144 kilobits per second.
CDMA competes against a standard called GSM that is dominant in most of the world, except for certain Asian countries like Korea and China where CDMA has begun to gain a foothold.
Korean carriers were the first to roll out CDMA 2000, and almost 1.3 million people have subscribed to the services there in the last year.
Qualcomm has also signed licensing deal with network operators and manufacturers in China, which has adopted CDMA as a nationwide standard. Already China Unicom Group, the parent of China's second-largest carrier, has spent almost $1.5 billion building its network.
Qualcomm's stock has been on a wild ride in the current quarter, hitting a 26-month low on Oct. 5 but rising about 37 percent since to its current level. The stock is still more than 50 percent off its 52-week high.
Shares in Qualcomm closed down almost 1 percent at $53.08 on Nasdaq. |
