re: Qualcomm & Globalstar
<< But there is hope for the Q. Perhaps the five year olds with cell phones will save us. >>
Are you still having difficulty reconciling the construct of an S-curve and the theoretical saturation point it leads to?
<< If all this spooks you, time to sell your No. 1 favorite stock. >>
Although Qualcomm has treated me right nicely, I'm relatively satisfied with my Qualcomm position at the moment thank you.
I have already trimmed my Qualcomm position 25% on 12/31/99 at 181, an additional 25% between March and May of 2000 at about 135 average, and about 20% of the remaining in February this year at 88. All this partially due to portfolio balance, but also due to my reaction to sector events and trends, and comparative financials (QCOM & NOK).
A NOK position held 95 to 98 (and considerable profit on same) funded my initial QCOM position, and QCOM has reciprocally funded my current NOK position.
I prefer to play wireless 2 ways at the moment, and am quite comfortable with both my choices. I'll do a rebalance at end of year and may trim one, the other, or both because I am a tad heavier at the moment than I would like to be in wireless, and I'll carefully examine the balance between QCOM and NOK, and there is another wireless play I am currently doing DD on.
I'll add two additional comments on how I view QCOM financials.
When I took my initial position in QCOM (after 4 years of having them on close watch) they were, in addition to being a technology developer, a fabless chipmaker, and technology "investor", also a handset and infrastructure OEM.
Obviously their business model has changed dramatically. As a result, I viewed last year as a transition year to the dramatically revised model, and although I followed their financials closely, was less concerned with the financials (decent) than what was happening with the adoption of Qcdma technology (not so decent).
The transition year is over.
Their will be no SpinCo spin in the near future (although I suspect there will be one when market conditions improve).
Moreover, valuation of tech stocks is under the microscope.
Obviously, Qualcomm still enjoys a very heady valuation compared to techs in general and their peers. I am certainly delighted with that, hope it continues, but am holding my breath relative to that phenomenon. I may not have to do an end of year rebalancing on Qualcomm. The market might do it for me.
As a consequence I will be examining their financials closer than I have since late 1998.
Every bit as important to me as financials, however, in terms of valuing a company is market leadership and whether or not the company has architectural control of the technology they promote.
The loss of market share and lack of carrier adoption for the technology that Qualcomm has architectural control of, over the last 21 months, is every bit as important to me as their quarter to quarter and year ending financials. Eventually their financials will be impacted as a result and so will their valuation.
<< If you read the 10-K, the earnings announcements, and the conference calls >>
Qualcomm remains my largest position. Of course I read and listen. Since they whack a lot of historical stuff early, I also make sure it is captured to disk.
I guess they need more storage space on their server?
Since you are a frequent poster on this thread, which happens to be the Nokia thread, let me ask you a question.
Do you listen to Nokia's quarterly calls?
Do you listen to their interim presentations?
Do you read their quarterly and annual earnings releases?
Have you perused their most recent 20-F filing?
Given the amount you post here I would assume you do. On the other hand, your questions and commentary are not indicative of same.
<< how a G* bankruptcy might affect Q. I suspect that cfoe probably has written on it, you might want to research his posts. >>
cfoe makes a very valuable contribution to the Qualcomm Moderated thread.
<< At your own pace, of course. >>
Be assured that I read all posts on the Moderated thread, have read all posts on S&P 500, and read the first 25,000 on "Coming of Range".
<< Yes, Globalstar is a problem >>
I'm sure you have seen this July WSJ article on this topic, but it is probably worth a repost anyway:
>> Spate of Write-Offs, Charges Calls Into Question Lofty 1990s Profits
Steve Liesman
Jonathan Weil
The Wall Street Journal
July 14, 2001
<snip>
"...In the early 1990s, Qualcomm Corp. thought GlobalStar Telecommunications Ltd. was engaged in a risky but promising endeavor with its effort to erect a world-wide satellite-telephone network. Qualcomm took a stake in the venture, holding as much as 6.5% of the company's equity.
From fiscal years 1995 to 2000, GlobalStar in any given year accounted for 7% to 19% of Qualcomm's annual revenue. Qualcomm, however, received cash for only about half of its GlobalStar sales. Qualcomm financed the rest, according to its SEC filings, and booked the revenue from the loan-generated sales -- about $667 million from 1995 through 2000.
As sales throughout its businesses took off, Qualcomm's stock soared. The San Diego-based telecommunications company's shares rose more than 27-fold in 1999, the best performance by any stock that year. For the fiscal year that ended in September 2000, its profits nearly tripled to $670 million. That capped a remarkable five-year run, during which Qualcomm's net income grew by a compounded annual rate of 67%.
Or did it? GlobalStar failed to attract many customers, and in January it defaulted on its Qualcomm loans. That prompted Qualcomm to take a $595 million write-off for the loans for its fiscal first quarter ended Dec. 31, in effect saying that some or all of the sales made possible by those loans never generated any cash and that the profit associated with those sales existed on paper only.
Qualcomm still beat the analysts' consensus earnings estimate by a penny a share, reporting pro forma earnings of 28 cents a share for its fiscal first quarter ended Dec. 31. How? It excluded the GlobalStar loan losses, among other expenses, from its pro forma results, despite having included the profits generated by those loans in earlier quarters' pro forma results.
Qualcomm's treasurer, Dick Grannis, says the exclusion of the GlobalStar losses from the pro forma figures is sensible because "GlobalStar is not really relevant anymore to our ongoing business. The purpose of pro forma results is to show investors the ongoing recurring operating results of the company." Mr. Grannis adds that the company used generally accepted accounting principles in deciding to record the GlobalStar revenue, and disclosed the loans' risks to investors in its SEC filings.
It's impossible to know precisely how much money Qualcomm has made since the mid-1990s without a formal earnings restatement, which Qualcomm says is unnecessary under GAAP. But since the beginning of 1996, on a pro forma basis excluding unusual charges, Qualcomm reported pretax income of $2.02 billion, according to Multex. Including all unusual charges, its pretax income was $1.44 billion over the same period, making it nearly 30% less profitable.
Lynn Turner, the SEC's chief accountant, says the recent spate of write-offs of vendor-financed receivables raises troubling questions, though he declines to comment on specific companies. "I get very concerned when the accounting rules turn out an answer that just doesn't reflect the economics," Mr. Turner says..." <<
- Eric - |
