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

To: mindy1968 who wrote (90275)	3/16/2010 10:48:56 AM
From: BoonDoggler	1 Recommendation Respond to of 196451

Let's see, he guided Q2 revenue at $2.25 billion to $2.45 billion, so that's give or take 200 million. Nope, he probably doesn't know to the penny.

To: mindy1968 who wrote (90275)	3/16/2010 11:21:50 AM
From: Jim Mullens	3 Recommendations Read Replies (1) \| Respond to of 196451

Mindy, re: FY10 Guidance / Crystal Ball----------------------------------------------------- First off, thanks for the kind words. Having no inside info as to FY10 guidance, my crystal ball observations (may have been posted before)--- 1. why did Keitel reduce guidance by a pittance for 2010? At the time, as I commented, it appeared ludicrous to me also (catching me flat-footed). After some thought I think the intent was directed at “managing guidance”. 1.a. Q’s original FY10 guidance was, by several analysts , thought to be very conservative---- BK sandbagging again. These several analysts came out with much higher FY 10 EPS estimates, driving the consensus above Q’s issued guidance. 1.b. Observing market history, its reaction to missing guidance whether it be the companies or the consensus ---- is often dramatic. I have noted how the fast traders (speculators / hedge funds, etc) can easily influence company specific and various derivative share prices, even now with programs that key on specific language within an earnings press release / “news” report (etc) – i.e. “misses consensus estimates”, etc. 1.c. One way of mitigating the above is to reign in analyst’s estimates, so they’re more in line with official company guidance. In other words, it’s imperative to manage both company and consensus guidance I think this was what BK attempted to do ( and successfully did ), with good intentions but bad results!!! I email an analyst this thought and he replied--- “if so, it sure backfired”. 1.d. The market reacted ( as did the “above consensus” analysts – reducing estimates) , rightly so, accepting the no growth guidance at face value—no sandbagging this time. With limited EPS growth and removing optimism for future upgrades, QCOM’s share price and PE naturally compressed lacking growth stock characteristics. 1.e. The handling of the CC Q&A was also “disappointing”, as I heard BK was not at his best still suffering from the residual effects of a bad cold. 2. “…trying to crawl out of the hole”- IMO, It will take some time to repair that damage, which will come when the company can again demonstrate sustained earnings growth together with a PE reflective of a growth company. 2.1. My thoughts are that Q’s strategic planning / internal budgeting (& staffing) suffered from unexpected delays in R&D harvests, Snapdragon being the most prominent. For reasons still unexplained, Snapdragon devices now ramping robustly appear to have been a year to 1 ½ years late to market, ceding first to market advantage to Apple with its internally developed processor enabling its 3G iPhone. Continued rapid headcount / Opex expense growth over the past several years (to support newer R&D initiatives), was predicated on having the revenue growth from earlier R&D. Without the matching revenue from Snapdragon (etc), earnings growth came to a virtual stand-still--- leaving us where we are today. Of course, coupled with this was the macro-economic melt-down---- a perfect storm. 3. As I ended my prior post on this subject, …”sustained top line growth long term should not be a problem. .. …… it behooves management to now place their primary focus on cost containment to drive shareholder value in support of Qualcomm’s long term investor base and employees. 4. To restore shareholder value ASAP- a three-pronged approach is suggested involving expense reductions and dividend increases. + 1. A new approach to strategic planning and internal budget development is needed, with the primary focus on bottom line results--- again growing EPS at least 15% annually. ...A) carefully estimate the best / worst case revenue ranges for QUALCOMM’s various markets …B) Then, use the low revenue range as the basis for developing internal budgets, with required expense reductions, if necessary, to achieve bottom line / EPS growth of at least 15% annually. + 2) If revenue growth in combination with expense reductions do not produce 15% YoY EPS growth, issue a special temporary dividend of $0.20 per quarter to help make up for that short-fall. The quarterly special temporary dividend may need to run more than a year, until 15% YoY EPS growth returns. Continuing to pay the special dividend for several quarters would reward long term shareholders and prevent opportunistic speculators from cashing in on a one-time event intended to benefit true shareholder investors. + 3) Increase the regular dividend to $0.20 cents per quarter, ….... Current cash & marketable securities totaling over $19B along with recurring cash flow should be more than adequate to fund both programs which would cost about $2.7B per year. Increasing the dividend should do several of positive things …+ boost the share price by- ……..+ Encouraging dividend investors to buy shares ……..+ providing a strong signal to the markets of QUALCOMM’s confidence in its ability to sustain long term earnings growth representative of a growth company. …+ reward long term buy and hold investors who stuck with the company during the trying years when the business model was under attack …+ help retired investors who haven’t yet recovered from big market losses in 2008 and currently earn low CD rates to supplement their income while holding onto Qualcomm shares waiting for earnings to improve.