Mark and All: I also heard the CFO, and anyone who listened carefully should be very pleased. First, he confirmed that earnings for this fiscal year (ending Sept. 30) would be in line with estimates at about $2.01, which is about 250% above the latest full year earnings. At today's closing price of 93, the stock is selling at 46 times this year's estimate, but growing at a rate that would justify better than twice that figure. Put another way, if earnings remain on target (and we know from past experience that QCOM generally exceeds estimates), the stock could easily justify a price of 200, though that is a bit beyond my own expectations.
Regarding the CFO comments on stock options, the company grants options at the going stock price when the options are granted. This is a form of salary with built-in incentives, assuming the stock price goes up. A prudent employee with option privileges would be wise to sell stock and buy options, holding those options at least a year, then exercise the options, selling more stock to get money to buy more options, and so forth. The reason is clear: If you took all your money in salary, you would probably be taxed at near 39%, whereas if you cash your stock after holding it at least a year, you pay only 20% on the profit. Viterbi is now 65, so he gets an extra exemption, and it's even more beneficial for him to take profits in a company which he had a major role in bringing to fruition.
To sum up, this is a very good interview, and any fairly knowledgable analyst will know that the stock at current prices is a real bargain. One other point. I don't believe the BENEFITS from the sale of the infrastructure division to Ericsson, now completed as of today, are fully recognized. That is, not only are handset and ASIC sales continuing at a brisk pace (contrary to the Wall Street Journal article, which the CFO simply said was not correct), but QUALCOMM no longer has to worry about the losses from its infrastructure division. |
