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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: JohnG who wrote (43957)	1/3/2005 10:16:01 AM
From: Art Bechhoefer	Respond to of 197425

John, an article in this week's BARRON'S says that reported 2005 earnings could fall an average of 20 percent for the larger tech stocks. The article estimates QCOM 2005 earnings at $1.45 before adjusting for options, and $1.28 after adjusting, for a loss of 12 percent. I think, first of all, that the earnings prediction is on the low side -- $1.55 or so would be more in the ball park. And secondly, QCOM might buy back shares, as it has in the past, thereby reducing the total number of outstanding shares and increasing the earnings per share. Among the stocks listed in the article, several would face major earnings adjustments -- particularly JDS Uniphase, LSI Logic, Siebel, Teradyne, Nortel, and Broadcom. In short, even though QCOM would have to adjust its earnings after expensing options, it would be affected much less than many other companies. Also, it is noteworthy that QCOM currently trades at about 30 times forward looking earnings (before expensing options). That is not a particularly high PE for a stock with the consistent growth that QCOM has achieved, nor is it high when you consider that a significant proportion of QCOM revenues come from royalties, making QCOM margins compare favorably with companies such as MSFT, IBM, CSCO, and INTC. A word of caution: The article leans heavily on research done by Steve Milunovich and Richard Farmer at Merrill Lynch. Art

To: JohnG who wrote (43957)	1/3/2005 12:35:31 PM
From: John Biddle	Read Replies (1) \| Respond to of 197425

I hate to think that the future of this country will fall into the hands of a group of myoptic accountants. They only see the little picture. I think you have it backwards. FASB is only attempting to make the financial statement more accurately represent the real world. What could be wrong with that? Without a steady strean of innovation the US simply will not be able to keep on the cutting edge -- and that is what it will take to stay in the economic forefront, given the Asian manufacturing economies of scale. Innovation does not depend on stock options, especially those outsized to such an extent that huge portions of major companies go into the pockets of a relative minority of players. We have had innovation in this country long before options became so popular, so options cannot reasonably be cited as the source of our innovativeness. Neither I nor FASB want to restrict the use of options, just more realistically account for them. I suspect you are afraid that if people really knew the extent of the shift of income from company owners to employees they would revalue those companies. But if they did so, they would only be doing so because of more transparent financial information.