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

To: Sawtooth who wrote (41082)	9/14/1999 6:01:00 PM
From: Ruffian	Read Replies (1) \| Respond to of 152472

S&P Update> Tuesday September 14, 5:33 pm Eastern Time S&P affirms Qualcomm Inc ratings ( PRESS RELEASE PROVIDED BY STANDARD & POOR'S ) NEW YORK, Sept 14 - Standard & Poor's today affirmed its ratings for Qualcomm Inc. following the company's planned sale of its handset operations (see list below). The company expects a definitive agreement to be completed by the end of the calendar year. San Diego, Calif-based Qualcomm's ratings reflect the company's substantially improved business and financial profile following resolution of patent disputes with AB LM Ericsson on terms favorable to Qualcomm earlier this year, the sale of its unprofitable base station manufacturing operations to Ericsson, and its late-July 1999 issuance of $1.1 billion in new common stock. These factors are somewhat offset by price pressures on special-purpose chips which the company supplies to most suppliers of CDMA wireless products and the company's obligation to offer a substantial degree of financial support to several speculative-grade businesses. Qualcomm commercialized the ''code division multiple access'' (CDMA) wireless communications technology. CDMA patent royalties are substantial, based on equipment manufacturers' revenues. As a result of the Ericsson agreement, Qualcomm will begin to earn royalties in about three years for equipment built to the next generation of the European standard Global System for Mobile Telecommunications (GSM) wireless technology as well. Qualcomm is the dominant supplier of profitable application-specific semiconductor chips to the CDMA industry, although competition is developing. The company also generates good cash flows from its truck fleet communications service, and provides services and equipment to the Globalstar satellite communications system. As an emerging technology subject to rapid growth and increasing competition, the handset business faces price pressures, rapid product line evolution, and the uncertainty of consumer tastes. Handsets represent about 50% of Qualcomm's revenues, but the business was seen as unlikely to achieve adequate scale and purchasing power to sustain desired profitability levels. Qualcomm's decision to exit the handset business should strengthen its operating profitability and ease its working capital requirements. Future prefinancing cash flows will depend on customer requirements for vendor financial support, potentially totaling over $1 billion. Still, the company's earlier decision to exit the base station business has helped to moderate the rate of growth of this exposure as well. Cash balances of $1.5 billion should remain ample over the near-to-intermediate term. Debt leverage is low, as growth has been financed by over $2 billion in common and preferred stock offerings in the last five years. Financial flexibility is further enhanced by $600 million availability in two revolving credit agreements. OUTLOOK: STABLE While the planned handset divestiture is a positive development, the company's business profile is still developing. Further stabilization of the company's long-term business and financial profile will be necessary before ratings could be raised further. RATINGS AFFIRMED Rating Corporate credit rating BB+ Preferred stock B+ Bank loan BB+