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Technology Stocks : QUALCOMM-The Wireless Wonder in 1999 -- Ignore unavailable to you. Want to Upgrade?

To: GO*QCOM who wrote (286)	5/28/2000 3:40:00 AM
From: GO*QCOM	Read Replies (1) \| Respond to of 343

SMARTMONEY.COM: Qualcomm's Skid is Getting Serious Dow Jones News Service ~ May 26, 2000 ~ 7:15 pm EST By Christopher O'Connor NEW YORK (Dow Jones)--Wireless-technology juggernaut Qualcomm (QCOM) continued its painful slide Friday amid uncertainty over its business prospects in crucial Asian markets. While analysts publicly disagreed on the San Diego company's prospects, investors don't seem to care about the debate - they're running away from the stock in droves. Qualcomm's share price dropped another 4% to $66.06 Friday. It has fallen for eight days straight, shaving a total of 40% off the erstwhile high-flier's market value. The latest bad news started earlier this week when South Korea said it will stop subsidizing cellular-phone companies in June. That move could drive up the cost of a Qualcomm phone in that fast-growing wireless market by as much as $ 179, one analysts said. Then on Thursday, The Wall Street Journal reported that a planned deal for Qualcomm to supply phones and transmission technology to one of China's two biggest cell-phone service providers might fall through. The double-dose of bad news accelerated a slide in the stock that really began around New Year's after the stock hit a split adjusted 52-week high of $200 a share. Since then, it has dropped a chilling 67%. But if you were lucky enough to have bought the stock a year ago instead of six months ago, you'd still be 150% ahead. The price stood at a split-adjusted $24 last May. Indeed, the stock burned so brightly last year (up more than 2000%) that it's no surprise it's one of the most spectacular losers in the current tech fizzle. Nevertheless, many continue to believe that Qualcomm's code division multiple access, or CDMA, wireless technology will dominate the next generation of high- speed wireless data transmission. Most experts agree that CDMA, for which Qualcomm owns the patents, offers clearer sound quality than older technologies. It also can handle a larger number of users over the same radio frequencies and allows for longer battery life and protection against eavesdropping. In the short term, however, there are plenty of questions. South Korea is important for Qualcomm because it makes up about 40% of the world's market for CDMA phones. That large chunk of market share and the effect the loss of the subsidies might have on Qualcomm's profits worried Chase H&Q's Edward Snyder and Credit Suisse First Boston's Marc Cabi. Each analyst issued a cautionary research note on the company Thursday. Snyder said the lack of subsidies could be enough to significantly retard subscriber growth there. Cabi said cell phones have penetrated South Korea so much - almost 60% of Koreans own one - that a slowdown in CDMA-phone sales might be inevitable anyway, adding to Qualcomm's problems. "We believe this slowdown could offset some of the stronger growth being seen in the United States, Latin America and Japan," Cabi wrote. The situation in China is unpredictable, the analysts said. Qualcomm has a licensing deal with the state-owned China United Telecommunications. (Unicom for short) to create a CDMA phone system in China, the world's third-largest mobile- phone market. But The Wall Street Journal reported Thursday that the deal may be in jeopardy due to indecision by Unicom. Cabi and Snyder added that a competing technology known as the global system for mobile communications (GSM), has a healthy head start on CDMA in China even if the deal doesn't dissolve. "In any case, even once deployment begins, significant revenue for Qualcomm would be at least 12 months away," Snyder said. Alex Cena of Salomon Smith Barney offered a much more sanguine view of Qualcomm today, although few seemed to be listening. He doubted that the China and South Korea developments would have any significant effect on profits and he saw this week's stock decline as an overreaction by investors. "We would be buying at these (current) levels given our continued belief that the long-term fundamentals for both Qualcomm and the wireless industry remain intact," he said. First of all, the uncertainty of the Chinese business has long been known, he said, declaring "No one in their right mind would include China in their forecasts." He added that the passage by the U.S. House of Representatives of a bill normalizing trade relations with China is an important step to convince the Chinese government to go ahead with establishment of the CDMA phone system. As for South Korea, that country's removal of wireless subsidies would mark the third such reduction since April 1999 and Qualcomm hasn't been hurt yet, Cena said. The Korean wireless service providers who are Qualcomm's customers will react to the subsidy cut by reducing the cost of their service and offering perks such as several months of free service, he predicted. Who's right? It's impossible to know right now, but Qualcomm sure has come down in valuation. It is currently trading at 46 times its projected fiscal 2001 earnings. And that's not far from its estimated three- to five-year growth rate of around 37%. Count on plenty of volatility and uncertainty from here. But let's face it, Qualcomm is at least starting to look pretty cheap. For more information and analysis of companies and mutual funds, visit SmartMoney.com at smartmoney.com (END) DOW JONES NEWS 05-26-00 07:14 PM