Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Ibexx who wrote (40954)	9/14/1999 12:53:00 PM
From: MileHigh	Read Replies (1) \| Respond to of 152472

I can't buy anymore anyway! As they say in the South, "I'm full up on Q now" <gg> MileHigh

To: Ibexx who wrote (40954)	9/14/1999 12:55:00 PM
From: JRH	Respond to of 152472

Ibexx and thread: Good article at Fool.com: fool.com 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.