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

To: Stock Farmer who wrote (114076)	2/22/2002 6:26:34 PM
From: Keith Feral	Read Replies (1) \| Respond to of 152472

Retained earnings do matter on some level. However, you can not randomly apply retained earnings to Qualcomm's current cash position, that's all.

To: Stock Farmer who wrote (114076)	2/22/2002 10:22:28 PM
From: Keith Feral	Respond to of 152472

<There are three sources of changes to shareholder equity: from actual results of operations, from hypothetical mark-to-market gains or losses and other incidental happenings, and from shareholders through equity financing.> <That 0.3 B$ that I am talking about is the sum of the first two categories for the company Qualcomm.> Retained earnings are a reflection of quarterly performance - they are the sum of net profits. However, growth companies like Qualcomm also make investments in other companies that generate losses, even though they have nothing to do with core operations. The usage of retained earnings has generously allowed companies to deduct their investment losses from core operating results with no impact on cash. For Qualcomm, the value of their retained earnings has been drained in FY 2001 with the writedown in impaired investments ranging from Globalstar to Pegaso to Vesper. However, cash and equivalents increased from $2,520,000 to $2,580,000 in 2001 despite a net loss of $548,743,000 from asset impairment and other charges. The December quarter marked an significant improvement for Qualcomm's fundamentals using your metric. Retained earnings were $244 million at the end of September 2001. They jumped 50% to $384,000,000 in the December quarter as the $139,000,000 in net income was added directly to the $244,000,000 in retained earnings from the previous quarter ending September 30,2001. The cash flow statements show that cash and equivalents increased by $6 million for the December quarter. They also transferred $252 million to QSI. I assume the bulk of this was directed to Vesper restructuring. If we were to begin charting the trend in retained earnings vs. the chart for Qualcomm's share price, it would certainly reflect a significant divergence in the December quarter as all the major restructurings for Qualcomm have taken place. Let's just guess that the $0.20 estimate for the March quarter generates $116 million in net income to increase retained earnings to $500 million. If the June and Spetember quarter show sequential improvements in net income (i. e. $120 million and $130 million), the value of retained earnings will equal $750 million at the end of FY 2002. That would be a dramatic increase from the end of FY 2001 - $244 million. I guess in this kind of market, anyone is free to derive whatever econometric models they choose. I have never seen anyone attempt to use retained earnings as a guage for the net present value of a corporation. However, I guess you could use the trend of the retained earnings during the course of a year to project the trend of the stock price. I thing the cleanup in writeoffs in 2001 created an excessively low value for retained earnings and share price. Now that Qualcomm is starting to issue clean earnings reports with net income actually contributing to retained earnings in 2002, I would expect the stock price to start acting better. Regards, Keith