To: Johnny Canuck who wrote (47274 ) 11/9/2011 3:34:54 AM From: Johnny Canuck Read Replies (1) | Respond to Lingering Concerns over Qualcomm’s Accounting: Greenberg Herb Greenberg Qualcomm Disclosure Insight Despite reporting favorable results last week, QCOM [QCOM 57.03 has a lingering accounting exposure dating back to at least Dec-09 that keeps us concerned. The nature of the accounting exposure is anybody’s guess as disclosures on the issue are vague and have provided no new information since being initially reported in Nov-10. The typical reaction of investors, which is to assume a disclosed risk related to an accounting matter and associated formal SEC investigation is already in the stock, may be misguided in this case. 2011 Dividends: Who’s Paying, Who’s Not? Corporations Rush to Credit Markets for Cash CNBC Stock Blog That QCOM disclosed this exposure in the first place, especially after sitting on related matters for nearly a year, tells you management deems the matter material. That it continues to be disclosed after yet another year suggests the company is having a difficult time resolving it. Using our expertise in parsing disclosures, and in this case assessing SEC investigations, we show that the risk associated with this matter could be greater than perceived. These are our concerns: -It is likely that the SEC has been investigating QCOM longer than the company’s disclosures indicate. -QCOM waited 2 months before disclosing the formal SEC investigation in the 10-K, giving it no prominence as would have been the case with an 8-K. -The formal investigation could indicate that QCOM is not cooperating with the SEC’s investigation. -QCOM sat on the whistleblower allegations for almost a year. -Whistleblowers are typically inside or otherwise close to the company. As such, they risk their position with the company, future employment opportunities, persecution, and retaliation. -There has been no meaningful update since the initial disclosure in Nov-10, so we do not know where the SEC investigation stands today. -QCOM has not elaborated on the nature of the whistleblower allegations or the issues in the SEC investigation. -QCOM’s initial disclosure of an internal review was in Nov-10, at which point it had already been completed. -QCOM did not report the results of the internal review. This is despite the fact the audit committee deemed it necessary to engage forensic accountants and independent legal counsel. -The poor quality of QCOM’s disclosure related to the SEC investigation leaves us questioning the company’s overall disclosure practices. 10-K Questions? Comments? Write to HerbOnTheStreet@cnbc.com Follow Herb on Twitter: @herbgreenberg
