Todd, I understand your cynicism about management, but it is misplaced in this case. Do you really believe that management would risk its personal net worth to tout the stock up for a two week window just to support a Super Bowl promotional campaign? Let's face it, every analyst on the Street was scrutinizing Asia, and questioning the company's position vis-a-vis South Korea--and you're suggesting the company hoped to "slip one by unnoticed"? Things may work that way in a Grisham novel, but not here. Didn't you notice that Sawtek had a similar release that coincided with QC's? Isn't it more reasonable to conclude that Samsung unilaterally modified its order schedule than to suggest that QC management decided to commit securities fraud for no economic gain (i.e. what, besides grief, did management get out of the two week window?).
People need to understand that Korea is not a monolithic topic. QC is selling the Koreans chipsets destined for domestic consumption (i.e. SK Telecom et al) and for export markets (i.e. the U.S., Japan etc). Samsung has publicly stated that it intends to substantially increase its export sales, from 25% of its output to 50%, during 1998. Given the pace of global CDMA deployments, QC management was not capricious in its believe that the Koreans could offset home market weakness through export sales (particularly in light of the weak won). Unfortunately, it apparently is taking the Koreans longer to ramp export sales, and this is pushing out their chip demand--but people, let's get a grip here--QC's chip volume is going to be even with the December quarter--we are talking about a flattening of demand, not a sequential decline.
As I noted before, the company indicated that Q2 revenue will be flat to up slightly from the $785mm reported in Q1. Earnings will be down due to (1) a sequential decline in royalties (due directly to the won's devaluation), (2) higher selling expenses associated with the Superbowl promotion and (3) gross profit margin pressures due to the canceled Hansol contract and soft "Q" phone sales. The company had clearly budgeted for higher revenue--so its business plan corroborated management's previous guidance--hence the earnings shortfall. |
