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

To: Jon Koplik who wrote (74177)	6/18/2000 9:00:00 AM
From: Mark Marcellus	Read Replies (4) \| Respond to of 152472

Walter Piecyk (last December) tried to do a mathematical calculation of the net present value (NPV) of Qualcomm's various business's future earnings. This is EXACTLY what Finance theory (as taught today at business schools) tells you should be used to come up with a logical valuation of a claim on a piece of a corporation (translation : the share price). Okay, let's get this straight. Piecyk sat down, rolled up his sleeves, and did a rigorous examination of the business. He then took his numbers, plugged them into his spreadsheet, and gosh darn it if the result didn't come out to be $1000! Truly miraculous, but there's more. This number was double even the lofty price which Qualcomm had reached at the time Piecyk did his analysis. This means that it was trading at a screaming 50% discount to the value he calculated. Piecyk, whose job it is to cover the telecommunications biz, and who presumably keeps up-to-date models for all the companies he covers, hadn't seen fit to say anything out of the ordinary for the entire year, much of which time Q was trading at an unbelievable discount of 80% and more. Suddenly, during Christmas week, and on one of the slowest news days of the year, he hits us with his "target". Maybe he was just behind in his work, and used the quiet holiday week to catch up on his number crunching. Or maybe, in the spirit of the holiday season, the scales were removed from his eyes and he suddenly realized what a marvelous value Qualcomm was. After all, there hadn't been much coverage up till then, right? Look, I agree that Snyder is a fool. But Piecyk is an even bigger one. And any Qualcomm holder who greeted Piecyk's analysis with anything other than skepticism (well, I would also accept disgust) has, IMO, lost their objectivity. More importantly, and the only thing of real concern to long term Q holders, Piecyk has done much more damage to the company than Snyder. It is a good thing that Qualcomm has a lot of cash, because they'd have a great deal of trouble floating a secondary or even a debt offering right now, because their credibility is low. And this would have been true even before the last week's events. Let's face it, Qualcomm the company has had a tough three months. Nothing wrong with that, every business has its ups and downs, and the 12 months before that were pretty spectacular. But by putting out that ridiculous report, Piecyk made Qualcomm look like just another tout stock. And by raising expectations to such unrealistic levels he set up the company for a big fall the first time they hit a rough patch. I don't waste a lot of time worrying about analysts, especially ones who do shoddy work. But to the degree I do waste any emotions on them, a lot more of my venom is directed towards folks like Piecyk. The folks like Snyder are, at best, giving you an early warning that you would do well to heed (very unlikely in this case). At worst, they are giving some folks an opportunity to buy more at a cheap price. The only thing that Qualcomm employees have to do to repair the damage Snyder has done, is their jobs. Eradicating the damage done by Piecyk will be much more difficult.