Re: Segment reporting and Vesper.
OK, Vesper loses $1 million every two days. In the past QCOM could account for it on the equity method - so easy to make the case "this is an investment, not a part of core QCOM."
However, when QCOM's ownership recently increased as of November 1, they passed the threshold where the degree of ownership is over 50%, and the accounting rules (that have existed for a long, long, time) require that an entity such as that must be consolidated - i.e. made an integral part of Qualcomm.
So, assuming one made the additional investment in hope that the new good money would bail out the old bad money, those GAAP rules say - this is now a part of Qualcomm.
But Vesper is hemmoraghing and will really pollute the eps. What to do, what to do...
So you can see what they did - new segment created for all the "Emerging (Marvin would say Submerging) Carriers Fund" investments, so they can say to Wall Street for pro-forma - please don't look over here at any of this Doofus segment stuff - it really isn't the real Qualcomm... yeah, yeah, we know 50% or more of the identifiable assets are over here, but please pay no attention to the man behind the curtain...
So, the real deal, is Qualcomm earned $.17 cents a share this last quarter, plain and simple. Qualcomm as a whole entity did not earn $.23 cents per share - just selected sgments did. People really need to base investment decisions on the $.17 not the $.23, because the "Emerging Carriers" or whatever stuff is no short-term phenomenon, but a long-run integral part of Qualcomm.
I'd even go so far as to say that to look at the long-range earnings model, an interesting academic exercise would be to restate for analysis the last 20 or so quarters of results, and reclass the net cash flows in or out from the CDMA Evangelist Investment Segment as a sales and marketing expense - and then see whether you like the business model. I do agree 100% that these activities are necessary to foster the spread of CDMA - and that maybe, for analysis (not GAAP), one might look at them as straight-out sales and marketing expenses, rather than all the investment accounting hocus-pocus that takes place.
Lastly, does anyone know if the $360 million bridge loan to Pegaso has been repaid? Kinda looks like the Submerging Investments division is about the same size - so either the bridge loan is still out there or they turned around and did something else with the money.
Anybody know?
I'm surprised nobody asked the question why pro-forma revenues were lower than GAAP revenues - the difference I beleive is QCOM's share of Vesper - and inputing that dear old Vesper is one of those outfits where the bottom line loss is a whole lot more than the top line revenues.
S100, you ask some other good questions. We should look into these. Some I think I may know the answer to, but without doing a little more digging there's a good chance I'd post something not quite factually accurate, and thus be on the receiving end of a well-deserved excoriation. |
