I read that article in the print version of Barrons.
First Hickey likes companies with "high cash flows, clean balance sheets and hefty gross margins", all of which apply to QCOM.
Second he likes companies like NOK, MSFT, EMC, ADBE, ORCL whose sales he thinks will hold up well in a recession.
But he doesn't seem to understand that people are not going to give up their mobile phones, and even if replacement cycles lengthen, they will still be turning over their handsets for new ones every 2-3 years. The current installed user base pretty much guarantees 1 billion plus handset sales/year.
As I've noted a couple of times here, the transition of the GSM world to 3G WCDMA ensures QCOM's growing the royalty bearing share of the handset market even if total global handset sales are flat year/year. The only real threat to growing royalty revenues for QCOM is if the recession results in cut throat competition and rapidly shrinking handset average ASPs
Third, I can't see what basis he has for the notion that QCOM's "guidance on operating results are at risk". QCOM has fairly recently affirmed that Q4 guidance is unchanged, and there is no guidance yet for FY2009, and won't be until QCOM reports on 11/5/08.
All that said, his comment that, "As an institutional favorite, Qualcomm shares could be ripe to become a target for a spate of aggressive selling", may well well turn out to be true if the forced redemptions and the market sell off continues.
David |
