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

To: waverider who wrote (70950)	4/19/2000 4:27:00 PM
From: William Hunt	Respond to of 152472

DR Jacobs is on Moneyline tonight for an interview BEST WISHES BILL

To: waverider who wrote (70950)	4/19/2000 10:15:00 PM
From: LBstocks	Read Replies (1) \| Respond to of 152472

Merrill Lynch report on QCOM's earnings> Highlights of March Quarter Results QUALCOMM completed the sale of its handset business to Kyocera on February 21, 2000. The company reported results both including and excluding this business. Going forward, we will focus on ongoing operations including the three major product segments: QCT (QUALCOMM CDMA Technologies, including ASIC Products), QTL (QUALCOMM Technology Licenses, including License, Development and Royalty fees), and QWS (QUALCOMM Wireless Systems which includes OmniTRACS and Globalstar products). In the March quarter, QUALCOMM reported a 16% increase in pro forma revenue to $649 million versus $558 million a year ago, below our estimate of $700 million. QCT revenues increased by 6% to $279.2 million, QTL revenues increased by 57% to $167.7 million, and QWS revenues increased by 5% to $188.3 million. QUALCOMM reported EPS of $0.25. However, reported results included charges for purchased in-process R&D, amortization of goodwill, costs associated with exiting and losses in the handset business, and other one-time expenses offset by investment gains of $267 million. Excluding these one-time and non-cash charges, pro forma operating EPS were $0.26 versus $0.18, modestly better than consensus expectations. As for the balance sheet, cash and equivalents were $772.5 million as of March 26, 2000. Accounts receivables were $659.3 million (82 days sales outstanding) and inventories were $77.9 million (18.0 inventory turns ratio). Business Trends QUALCOMM?s better than expected operating EPS reflected higher than expected royalty and licensing fees, higher QWS operating margins and the exclusion of goodwill amortization. QWS operating margins of 44% were positively impacted by the recognition of residual profits from an earlier Globalstar gateway sale. Excluding this, QWS operating margins were 36%, significantly above last year?s 12% operating margin. The main contributor to this performance is improved profitability of OmniTRACS, QUALCOMM?s satellite-based transportation communications systems. We are concerned about the sustainability of this level of operating margins in the QWS segment. Furthermore, while OmniTRACS represents about 15% of total revenues now, we do not believe that is major consideration for QUALCOMM investors. Instead, investors should be focused on the sustainability of the royalty stream, and the growth in chipset sales. Recent events suggest to us that QUALCOMM?s patent position in CDMA will result in solid growth in royalty payments for the next several years. The company continues to sign up new licensees, and extend current licensing agreements. We believe that the eventual adoption of any of the new data-centric CDMA variants (HDR, 1XTREME, W-CDMA or cdma2000) will help sustain the growth in QUALCOMM?s royalty stream, and continues to be the basis for our long-term Buy recommendation. However, in the near term, we remain concerned about the growth of the chipset business. Chipsets, which reported disappointing results in the quarter, were 46% of total revenues and 64% of pretax profits in fiscal 1999. In the March quarter, they only represented 43% of sales and 27% of profits. QUALCOMM shipped 11 million Mobile Station Modems (MSMs) phone chips in the quarter versus 9 million units in March 1999, and compared to our estimate of 13 million. Chipset revenues were about $20 million below our estimates. The lower than expected revenues in the chipset business caused QCT operating margins to decline by 9 points versus the March 1999 quarter. On the positive side, we estimate that the book-to-bill for chipsets was about 1.3 this quarter, and management expects to ship more than 14.5 million MSMs in the June quarter. However, this translates into only 13% segment growth to $360 million in the June 2000 quarter. It is important that QUALCOMM establish better top line and more consistent bottom line performance in this sector to provide some visibility into near term earnings. In the mean time, we need to adjust our fiscal 2000 EPS model by restating December 1999 quarter results, and fine-tuning the next two quarters to reflect the divestiture of the company?s handset business and provide a more consistent base to compare future earnings performance against. Based on the historic pro forma numbers provided, we are adjusting our FY2000 revenue estimate to $3.04 billion and our EPS estimate to $1.10. We expect FY2001 revenues to increase by 23% to $3.7 billion and EPS to grow 27% to $1.40. For a company with these growth prospects, we believe QUALCOMM is fairly valued, and we are maintaining our Neutral intermediate-term rating.