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

To: dylan murphy who wrote (80945)	10/12/2008 8:50:35 PM
From: engineer	Read Replies (1) \| Respond to of 197254

probably closer to $14B by now...

To: dylan murphy who wrote (80945)	10/13/2008 12:52:09 AM
From: David E. Taylor	8 Recommendations Read Replies (4) \| Respond to of 197254

I've been mulling this over for a few weeks now. Note (2) to the Q3 filing shows the following as of 6/29/08: Marketable Securities Available for Sale: Current Noncurrent (In millions) (In millions) U.S. Treasury Securities $ 121 $ 0 GSE Securities 260 0 Foreign government bonds 18 0 Corporate bonds and notes 2,454 166 Mortgage and asset-backed securities 519 0 Auction rate securities - 193 Non-investment-grade debt securities 20 2,115 Equity securities 164 879 Equity mutual funds and exchange traded funds 0 1,214 Debt mutual funds 88 0 Totals $ 3,644 $ 4,567 My own take on the listed holdings in this table: (1) The US treasuries and foreign government bonds are OK. (2) Unless they saw the FRE/FNM collapse coming and sold them early in the quarter, the $260 million of GSE (Government Sponsored Enterprise) securities are probably toast. (3) The $2,454 million (current) and $166 million (non-current) of corporate bonds and notes may have taken a hit, but it obviously depends which companies sat behind these, and what steps, if any, QCOM took to sell those at risk and preserve cash. Hopefully not much of this large amount was invested in the financial institutions like Lehman, WaMU, Wachovia, AIG, et al that ran off the cliff in the quarter. “Current” means QCOM regarded these as short term holdings to be cashed in and used as necessary for corporate purposes, “non-current” means QCOM regarded these securities as longer term and not needed in the following 12 months. (4) The $519 million of mortgage and asset backed securities may also be toast unless they were sold early in the quarter. (5) The $193 million of ARS’s are OK. These used to be lumped in with the “current mortgage and asset backed securities”, but as of 3/30/08 they were separated out and moved to “non-current” due to “a disruption in credit markets that caused the auction mechanism to fail to set market-clearing rates and provide liquidity for sellers.”. They are carried at par value because they “are rated AAA/Aaa, are collateralized by student loans substantially guaranteed by the U.S. government and continue to pay interest in accordance with their contractual terms. (6) The $20 million (current) and $2,115 million of “non-current” “non-investment grade debt securities”, IMO are a cause for concern since there is no indication of what these are, the descriptive term is not exactly re-assuring and sounds like “high risk”, and the bulk of them were classified as “non-current” and so were regarded as longer term holdings. Ergo, they may have taken a major hit unless QCOM was nimble in unloading those that were at most risk of losing value. (7) The $164 million (current) and $879 million (non-current) of equity securities may also have taken a hit. Again depends what QCOM did to reduce exposure to market declines. (8) The $1,214 million in mutual funds and ETF’s, were are all classified as “non-current”, were regarded as longer term holdings, and so could well have taken a hit. But, their value could also recover given time. Again depends on what they were invested in, hopefully not over-weight financials. (9) The $88 million in "debt mutual funds" also could have taken a hit if they were held, depends what they were. (10) There was also $2,970 billion in cash and cash equivalents on the books as of 6/29/08. In the commentary following this table, QCOM states: “At June 29, 2008 and September 30, 2007, unrealized gains on marketable securities were $134 million and $510 million, respectively, and unrealized losses were $253 million and $89 million, respectively. The unrealized losses on the Company’s investments in marketable securities generally relate to liquidity, credit and economic concerns that have depressed security values over the past several months. The Company considers these unrealized losses to be temporary.” Sounds a bit like my thinking back in June! Here’s how the unrealized gains and losses have moved since 9/30/07 (all in millions): 9/30/07 12/30/07 3/30/08 6/29/08 Unrealized Gains 510 343 173 134 Unrealized Losses 89 133 350 253 That’s a swing of $540 million from 9/30/07 through 6/29/08, and one inference that can be made from this is that QCOM sat on its investments as their value declined, since unrealized gains decreased significantly and unrealized losses increased significantly. Looks a bit like my own portfolio! But the decrease in unrealized gains could also mean they took some money off the table by cashing in some winners. I’m pushed to attach any alternative interpretation to the increase in unrealized losses except that they either held onto losers or prematurely invested in securities that subsequently lost value. Since they did cut their unrealized losses a bit between 3/30/08 and 6/30/08, these securities either increased in value or they sold some losers. But were they nimble enough to avoid a major hit from the events of the 3 months from 6/29/08 through 9/30/08, particularly in the financial sector? Maybe the saving grace will be that the quarter ended before the tsunami of October. We have three months for some recovery and so we may never know how bad it actually got! But, all-in-all, not that encouraging IMO. How much the stock price will suffer if the value of these holdings has gone down significantly is anybody’s guess. QCOM is not the only company with the bulk of its cash in market investments that have likely decreased significantly in value. I guess we’re going to find out on 11/5/08 how well QCOM’s in-house and outside advisory financial guys performed with this in the last few months. I hope we see a big increase in “cash” and a decrease in “marketable securities”! David