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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (32567)	4/28/2003 4:36:26 AM
From: elmatador	Read Replies (1) \| Respond to of 74559

Qualcomm's Strong Growth Might Be Ending-Analysts By Yukari Iwatani CHICAGO (Reuters) - Wireless telephone chipmaker Qualcomm Inc.'s string of exceptionally strong earnings results might be coming to an end, as growth from China and India disappoint and it faces greater competition, analysts said on Thursday. The San Diego-based company late on Wednesday posted a higher quarterly net profit and doubled its revenue, but it also acknowledged slower-than-expected growth and an oversupply of chips in Asia -- two issues it had disputed until now. Shares of Qualcomm rose as high as $33.90 during morning trading, but closed at $32.63, down 35 cents, or 1.1 percent, on Nasdaq. "They blip like this and everyone draws the proper conclusion the story isn't as good as it was two quarters ago," said Todd Bernier, wireless analyst with Morningstar. "They've probably got another quarter or two of good strong growth like this but then it's over. It gets murkier." Qualcomm raised its earnings guidance for its fiscal year ending in September, but it cut its phone shipment estimate for calendar 2003. Investors are realizing the outlook implies a weaker second half of the year, analysts said. DOUBTS DESPITE DOUBLE-DIGIT GROWTH While other telecommunications equipment companies have been hurt by the sluggish economy and lower industry spending, Qualcomm has consistently outperformed its peers on the strength of its CDMA wireless technology. Qualcomm owns most of the patents to CDMA, or Code Division Multiple Access, the dominant wireless technology in U.S. networks and the second most-common phone technology in the world. It licenses its technology and provides more than 90 percent of the chips for CDMA phones. As other equipment companies cut costs to stem massive losses, the company has been seemingly immune to the downturn, enjoying high double-digit growth. Qualcomm's shares have fallen only 6 percent since a year ago while Standard & Poor's communications equipment index has fallen nearly 40 percent. Even so, the company has been unable to shake persistent worries about sustaining its growth, a concern that now seems justified, analysts said. Qualcomm's fiscal second-quarter revenue grew more than 40 percent to $1.0 billion from a year ago, but was down slightly from the first quarter. The company expects revenue to fall again in the current quarter although it will be up 27 percent from a year ago. Qualcomm raised its full year guidance, but even that only accounts for the better-than-expected profits reported in the fiscal second quarter, analysts said. "While it looks like the company was guiding up, once you worked through the numbers, you had to take your chipset estimates down for September in order to get into guidance," said Matthew Hoffman, analyst with SoundView Technology. CHINA AND INDIA DISAPPOINT Qualcomm counted on the China and India markets to drive growth this year, but India delayed the commercial launch of its CDMA wireless service by a month and China has seen a slowdown in demand. The company admitted to an oversupply of phones in Asia. "They're acknowledging what most of us have known. For some people, it's alarming because it means they don't have another rabbit in their hat," said Alex Vallecillo, senior portfolio manager of Armada Funds, which owns Qualcomm stock. Justin McNichols, portfolio manager of San Francisco-based Osborne Partners Capital Management, said his firm sold its Qualcomm shares last month when they hit the high $30s. "The stock becomes overvalued in the high $30s based on the realistic long-term growth rate (and) the potential for an inventory problem," he said. Qualcomm also faces the threat of losing its stranglehold on the CDMA market as Nokia and Samsung Electronics Co. , the world's No. 1 and No. 3 mobile phone makers, make CDMA cell phones based on their own chips. While the company's outlook is gloomier than the rosy picture it presented as recently as last month, it is still in a good long-term position, analysts said. Qualcomm might see strong growth again if demand in India and China picks up. It also stands to gain from the launch over the next few years of WCDMA service, which lets users surf the Web wirelessly at super-high speeds via mobile devices. "I'm not ready to concede its game, set, and match for their growth, but in the next quarter or two, the growth is not going to appear on paper probably as large as it did in the last few quarters," Vallecillo said.