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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: Caxton Rhodes who wrote (1498)	9/14/1999 12:54:00 PM
From: 2brasil	Respond to of 13582

Qualcomm Recovers from Latest Freak Out By Brian Graney (TMF Panic) September 14, 1999 Cell phone Code Division Multiple Access (CDMA) technology developer Qualcomm (Nasdaq: QCOM) moved up this morning after telling the world that it expects its current fiscal Q4 operating earnings will either meet or exceed the consensus estimate of $0.87 per share. The guidance came a day after the world (in this case, the World of the Wall Street Wise) freaked and assumed the worst when President Rich Sulpizio canceled a planned appearance at an SG Cowen investment conference in Boston, citing a scheduling conflict. Amid the confusion, the company's stock dropped 7% yesterday. In the official analyst thesaurus, "scheduling conflict" is apparently synonymous with "quarterly earnings shortfall." It may be hard to determine precisely, but it's probably a fair bet that the dayplanner of an executive guiding a $30 billion company is a little bit more prone to a screw-up than the schedule of some Wall Street regurgitator whose livelihood depends on obsessing about quarterly earnings results. Maybe it's just me, but perhaps the executive in this case deserves to receive the benefit of the doubt. In any event, investors should cheer whenever short-term irrationality gets the better of long-term common sense. Focusing on business fundamentals and ignoring business noise such as yesterday's cancellation over-reaction is what long-term investing is all about. Judging from today's calming press release from Qualcomm, the company agrees with this point of view. After dashing any lingering fears by saying that demand for its CDMA chipsets and phones has increased from the previous quarter, the firm shed some light on where its business focus will be in the future. It's entirely possible that Sulpizio bagged yesterday's conference to meet with parties interested in Qualcomm's terrestrial-based CDMA handset business, which the company appears to be ready to divest. "With increased competition, parts shortages, and industry consolidation reducing margins in consumer products, Qualcomm desires to transition the business to a manufacturer that will support its customer base and employees while providing economies of scale, a strong purchasing base, and other operating efficiencies," the firm said today. An agreement relating to the handset business is expected before the end of the year. In the meantime, Qualcomm said it may take a one-time charge to its earnings as it tries to position itself for future growth by undertaking initiatives to cut expenses and improve margins. This kind of talk usually comes from a company on its heels, not from a firm whose earnings last quarter blew away estimates by 19%. The company's operating margin (excluding one-time charges) expanded in fiscal Q3 to 21% from 6% a year ago as revenues from technology licenses, royalties, and development fees nearly doubled to $92.6 million. According to today's guidance, that figure will continue to expand in Q4. With Qualcomm tweaking its CDMA technology-centric business model, return on invested capital (ROIC) should continue to march upward. In the most recent quarter, ROIC came in at 17.5%, up substantially from 8.7% at the end of fiscal 1999. Investors should expect Qualcomm's ongoing earnings growth to continue to grab the spotlight, but the firm's ability to lengthen the spread between its ROIC and its cost of capital will be the real driver of its share price performance over time. As long as the company can continue to earn more from every dollar invested in the business, short-term noise from meetings cancellations and such nonsense should be considered opportunities to hop aboard the Qualcomm growth train. Feedback about News & Commentary? Please send mail to news@fool.com. • Email this to a Friend • Format for Printing Enter symbol(s): News Quote Overview Messages Indices DJIA 10909.07 -121.26 S&P 500 1333.99 -10.14 NASDAQ 2849.96 +5.19 RUSSELL 437.15 -2.5 Headlines FOOL NEWS Qualcomm Recovers from Latest Freak Out Interstate Bakeries Poised for a Pleasant Trip? Fool Plate Special -- Pier 1 Takes a Long Walk Breakfast With The Fool -- Solectron Gets Smart QuickNews for Monday PairGain Warns of Q3 Shortfall Fool On the Hill -- Showdown at the Accounting Corral Harbinger: Good Things To Come Bell Atlantic and Vodafone Eye Joint Venture in U.S. Affymetrix: The Gene-uine Article? Fool Plate Special -- Hershey Doesn't Skor 3Com Plans Palm Computing IPO Daily Trouble -- Pediatrix Medical Group, Inc. Daily Double -- SafeScience Inc. Earnings Calendar for This Week OTHER SOURCES Mellon Bank Expects 14% Earnings Growth Within Three Years [Bloomberg] Lernout & Hauspie Signs Website Translation Deal With Yahoo! [Business Wire] Best Buy Posts 34% Rise in Fiscal Q2 EPS, Sales Up 23% [PRNewswire] August Retail Sales Up Higher Than Expected 1.2% [CNNfn] Federal-Mogul Sees Second Half Results Below Estimates [PRNewswire] News Specials Strategies Personal Finance School Help Copyright ©1995-1999 The Motley Fool. All rights reserved.

To: Caxton Rhodes who wrote (1498)	9/14/1999 12:58:00 PM
From: Ramsey Su	Read Replies (4) \| Respond to of 13582

A word of thanks to all, for not polluting this thread during the last couple of days. Now that QC's intentions for the handset division is formally announced, may be it is time to look at some numbers. Using 1 million handsets per month and $200 per handset, annualize sales is $2.4 billion. What should something like that be worth? I am not aware of previous similar sales. 4X sales is almost $10 billion. Plus the $1 billion they already have in bank, that is relatively a big chunk of cash. What are they going to be using the money for? If they are going to be a pure R&D company, that can hire a boatload of engineers. May be we should invest in real estate around sorrento mesa. Ramsey