All,
More from "Fool" web site. Some incorrect information though. See if you guys can find them.
FOOL PLATE SPECIAL
An Investment Opinion
by Alex Schay
Qualcomm Soars
QUALCOMM Inc. (Nasdaq:QCOM - news) , a communications company providing wireless phone equipment, services, and related infrastructure, soared $4 13/16 to $52 5/16 this morning on the heels of favorable first quarter results. The company reported Q1 EPS of $0.58 before certain non-recurring items, compared with prior year period EPS of $0.13. After subtracting $0.08 per share for writing off $7 million worth of "in process research and development" (as a result of assets acquired from Now Software last November that will never generate revenue) and writing down $5 million worth of leased manufacturing equipment that will no longer be utilized, EPS came in at $0.50. After these non-recurring items, EPS still beat expectations of $0.49 for the quarter. QUALCOMM reported surprising strength in demand for its Application Specific Integrated Circuit (ASIC) products in South Korea despite the devaluation of the won, and the company noted that it expects to see continued strength from the region going.
QUALCOMM's strong showing in the first quarter was significantly impacted by healthy margin improvements. The company's "Communications systems" revenue line (86% of total sales) saw gross margins increase to 25%, compared with 20% in the prior year period and 24% in the fourth quarter. This margin expansion is attributable to the company's higher manufacturing volume due to the record number of shipments of Code Division Multiple Access (CDMA) phones and related chip sets. In the quarter QUALCOMM also sold 10,000 OmniTRACS units (4% addition to the total number of units), which link transportation companies to a two-way data messaging and position reporting service that the company operates by means of a geostationary satellite system. Finally, the company reported that all operating expenses declined in the quarter with the exception of "General and administrative," which gained slightly as a result of increased litigation expenses. Looking at the balance sheet, the company saw a bulge in inventories and receivables, but these seem to be in line with the increase in sales, and day s sales oustanding (DSO) actually dropped.
A key component of QUALCOMM's strategy is to continue to be a leading CDMA equipment provider and evangelist for CDMA as the global wireless standard. The company's peculiar brand of CDMA is known as cdmaOne, and only Motorola (NYSE:MOT - news) and Lucent Technologies (NYSE:LU - news) operate in the same space, supporting the technology. However, QUALCOMM CEO Irwin Jacobs noted, "We have yet to see a change in the competitive landscape for handsets." Motorola, which only recently began shipping CDMA handsets, had a preliminary patent dispute injunction against QUALCOMM's "Q" phone denied. (Motorola claims that the phone is patterned on its own StarTac mobil phone.) With contract service revenues set to grow (Q1 increase of 66%) through the company's partnership in Globalstar Telecommunications (Nasdaq:GSTRF - news) , investors may want to take a closer look at this company trading at 23 times 1998 earnings estimates of $2.19 per share, which is a substantial discount to its annualized growth rate of 43%.
Good luck to all
Brian H.
|
