The San Diego Union-Tribune, 7/14/00, "The Q believers"
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The Q believers
Longtime investors in Qualcomm aren't giving up the ship
By Mike Drummond
STAFF WRITER
July 14, 2000
When Qualcomm stock plunged more than 30 percent in April, Michael Eisenberg lost thousands of dollars. When it plummeted again in May, this time shedding almost half its value, he lost thousands more.
Eisenberg doesn't care. The long-time investor, whose 5,000 shares are worth something like 80 percent less than their all-time high in early January, is actually eager to buy more.
"The story has not changed," says the Berkeley resident, who started buying Qualcomm stock in the mid-1990s. "As far as I'm concerned, the story's gotten better."
That "story" is Qualcomm's Code Division Multiple Access wireless technology, commonly called CDMA. And then there's the San Diego company's High Data Rate technology -- designed to deliver sound, video and wireless Internet connectivity at blistering speeds.
Despite the dismal performance of Qualcomm stock this year, Eisenberg and his fellow Q believers maintain that such technologies will eventually propel the company's stock back into the stratosphere.
There's evidence for the argument that Qualcomm -- the most successful stock on the Nasdaq Stock Market last year -- now represents a buying opportunity. The number of CDMA subscribers worldwide doubled in the past year to 57 million users, making it by far the fastest growing wireless technology on the planet, says the CDMA Development Group, a trade group.
That pales compared to the 290 million subscribers using Global System for Mobile Communications, or GSM. However, GSM technology is older and doesn't have as much capacity and technological evolutionary growth capability as CDMA, some experts say.
So, despite recent pronouncements from a few bearish analysts that "CDMA is dead in China," and that declining sales of CDMA-based mobile phones in Korea will sour Qualcomm's revenues this year, many long-time Qualcomm shareholders are holding steady during this stormy season of F.U.D. -- an abbreviation used in online chat rooms for fear, uncertainty and doubt.
"I don't know of a better stock right now," Eisenberg says. "If it were $175 a share right now, I'd say buy."
Shares of Qualcomm, traded as QCOM, are down 65 percent from their high for this year. Qualcomm closed yesterday at $62.
The top 10 institutional investors appear agree with Eisenberg's bullish view. The American Century mutual fund group, which with 27.4 million shares is the largest holder of Qualcomm stock, added 3.4 million shares in March.
Many other major investors did, too, but with two notable exceptions.
Putnam Investment dumped 8 million shares, trimming its position to 12.7 million, while Fidelity Management unloaded 1.3 million shares, leaving it with 10.5 million.
One of Wall Street's more vocal Qualcomm bears is Ed Snyder at Chase Hambrecht & Quist. A relative latecomer, he initiated coverage of Qualcomm last summer, rating it a mere "market perform."
Critics are quick to note he badly missed the mark with that prediction, when shares of Qualcomm climbed 26-fold by the end of last year.
Nonetheless, he -- like many other analysts -- has the power to move entire market sectors. Qualcomm's stock slipped more than 13 percent within hours recently when Snyder pronounced that Qualcomm's earnings will turn south with slower sales in Korea and that CDMA will never gain widespread adoption in China.
"It's incredible that someone can have that kind of impact," says Anatole Raif, a wireless technology consultant in the San Diego area and a longtime Qualcomm shareholder. "(Snyder's) been wrong for so long, it's obvious to me there's something else driving his intentions."
Mark Roberts, an analyst with First Union Securities who has sparred on national television with Snyder, says he believes Snyder is wedded to a faulty premise he must defend to save face in the investing community.
"There's a tendency among analysts that when you've made a decision and you find out your thesis is wrong, then they keep reinventing it to make it right," Roberts says.
And when it comes to Snyder's bearish predictions for Qualcomm, Roberts doesn't hesitate: "He's dead wrong."
Snyder dismisses allegations of being "on the take" from Qualcomm competitors such as Nokia or Motorola -- "If I were, would I tell you?" he says. And he scoffs when asked if he harbors some anti-Qualcomm agenda.
He says careful analysis leads him to make dispassionate reports on Qualcomm. He doubts worldwide demand for CDMA phones will offset expected slumping sales in South Korea -- the single largest CDMA market. As for China, he says GSM systems have a long head start and customers there will not readily switch to a CDMA carrier just because someone says the technology is better.
"It's a good business," he says of Qualcomm. "It's just not gonna conquer the world."
Don't tell that to hardcore Qualcomm shareholders.
Caxton Rhodes, a 40-something Bay Area resident who retired with Qualcomm stock riches last year, sees the investing glass as half-full.
"We've been extremely beaten down this year," he says. "But, to me, that's a buying opportunity."
Mike Doyle, a Silicon Valley resident who has made millions on Qualcomm, concurs.
"Last year, Qualcomm couldn't do anything wrong," he says. "This year, the company is in everybody's cross-hairs."
Like other veteran Qualcomm shareholders who endured violent stock swings in the mid-1990s, he intends to add to his position, convinced that Qualcomm's technology will be the standard of the future.
"In my opinion, the story still keeps getting stronger," he says, adding that Qualcomm stock will "move into a pure oxygen track" if its High Data Rate technology becomes widely deployed.
Meanwhile, he'll invest in Qualcomm as a long-term play.
"Just as it got kooky on the upside last year," he says, "it's just as likely to go zany on the downside."
Copyright 2000 Union-Tribune Publishing Co. |
