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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: zx who wrote (7687)	1/28/1998 1:17:00 PM
From: Yogi	Read Replies (1) \| Respond to of 152472

Shorts! Read this... >From Jubak's Journal... I'm actually most embarrassed by my decision to ignore Qualcomm, the last of these stocks. I did what I urge all of my readers not to do: I made an investment decision based on a market guru's opinion rather than on my own research. I'm a big fan of Michael Murphy, the editor of the California Technology Stock Letter, so when Murphy panned Qualcomm, I took it seriously. Murphy felt that the company's wireless standard CDMA wasn't all it was cracked up to be and wouldn't be able to compete with the GSM standard that then dominated Europe. That was good enough for me. So I ignored the stock as it climbed from around $45 a share in August to near $70 in November. But a company that beats analyst estimates by 16%, as Qualcomm did in the quarter just reported, gets my attention -- especially when the company beat analyst estimates by an average of 10% in the previous three quarters as well. Add the fact that analysts are raising their estimates on Qualcomm's earnings during a time when they are cutting their projections at almost every other technology company and the story becomes truly compelling. I think this stock could trade at $75 in 12 months. Once you've re-evaluated a stock that you mistakenly ignored, you shouldn't just mindlessly buy it. You've still got to calculate how the potential risk and return on each stock stacks up against what you already own and against any other stock you might be considering. These three stocks, for example, have very different risk/return profiles. In the most recent quarter, about 12% of Sun's sales came from Japan, a market that still seems to be in decline. Revenue from the entire Pacific region grew only modestly in the most recent quarter and could actually show a decline in the upcoming quarters. I have to weigh that risk against the potential 22% gain if the stock hits my projected target price in 12 months. I'm leery of the effect of Asia on the price of all technology stocks, so I think I'll hold off on Sun for the moment -- the upside is attractive but not attractive enough. It goes into my watch list and not into my portfolio. Lucent is much less risky, but also promises a far lower return of less than 10% in 12 months. That's just not enough for me to add the stock to Jubak's Picks, although I think it's a fine choice for long-term investors looking for solid performance with very little risk. Qualcomm is riskier than either Sun or Lucent -- but it also promises an upside of about 36% over the next 12 months. On the downside, Qualcomm has even more Asian exposure than Sun. Significant portions of the company's chip sales are to Korean manufacturers. The firm saw strong growth to that market in the quarter just concluded, but my guess is that, consistent with what other technology companies are reporting, any fall-off in sales is more likely to show up in the next two quarters. And I can't rule out a general slowing in the wireless-phone market. But on the up side, the company has a big new product coming out in February and sales have hit the sweet spot where profit margins start to rise with volume. It is showing strong sales to Sprint (FON) in the U.S. and improving volumes at GTE Corp. (GTE), Airtouch (ATI), Bell Atlantic (BEL) and Ameritech (AIT). Rivals such as Motorola (MOT) and Philips/Lucent have hit snags in launching competitive CDMA phones, which should be enough to offset pricing pressure from Samsung.