re: QCOM 2Q02 results:
EPS: 0.20 pro forma, 0.05 GAAP
The difference, as is true every quarter, comes from "one-time" losses in their Strategic Investments Dept. This time, it was Vesper and LEAP wireless. 3/4 of the money they made in chips and royalties, were lost this way, this quarter. Including these losses, their results from the last 4 reported quarters are: -0.34, -0.06, +0.17, and (latest) +0.05, which sum to -0.18. Notice the negative sign, indicating they are not running the overall business in a way that is profitable.
Perhaps they will, at some point in the future, become a profitable business. It was discouraging, that their guidance was all in pro forma numbers. I heard nothing to indicate that management sees an endpoint to the endless Strategic Investment losses. And no guidance, to try and quantify the future risk from these investments.
At some point, one of two things will happen:
1. The losses in Strategic Investments will end, and GAAP = pro forma. This will happen, either because QCOM management stops doing these investments, or they get a lot more competent about choozing what to invest in. So far, their track record in these investments is very poor (cash poured in > profits from good investments + profits from sales generated), so I'd say the best thing is just to stop altogether. I have the same opinion, about telecom-equips doing vendor financing. JustSayNo, is the best policy.
2. The large losses continue, and investors start valuing the company based on GAAP results. This implies a much lower stock price, from today's level. Annualize today's GAAP earnings, assign a PE of 40, and you get a stock price of 8.
I bought more stock at $32.50 yesterday, so I'm betting on choice 1. But, at some point, I will give up on this company, if they keep running it the way they are. |
