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

To: Charles Morrison who wrote (7994)	2/5/1998 8:12:00 PM
From: Tae Spam Kim	Read Replies (1) \| Respond to of 152472

Well here are my notes I promised from the press release and the conference call. Tae Kim P.S. I already said I was LUCKY today on QCOM and my stock letter recommendations have nothing to do with my personal trading in QCOM. I'm sorry, in retrospect, I probably shouldn't have posted my site address (where I intended to post my QCOM notes/comments) and also state my short-term negative opinion on QCOM. I was a little overexcited and I apologize. At this stage, I should have been more sensitive to the QCOM holders out there. Longer term, I believe QCOM will do fine. CDMA is the best technology out there and the royalties will eventually come streaming in. Here are the major points from the press release: -QCOM announces a major reduction in second quarter earnings and Communications Systems margin from the prior quarter due to recent events involving customers in South Korea -Two Korean manufacturers have just requested a partial cancellation or postponement of 2nd quarter orders of Application Specific Integrated Circuits (ASICs) -Previously announced order of 1800Mhz Q-phones will not be fulfilled -Demand for QCP models remain strong -QCOM is confident, despite the current economic turmoil, the Asian markets including South Korea represent a vibrant long-term opportunity for QCOM and CDMA. CDMA technology continues to be rapidly deployed around the world -the weaker Korean currency will strengthen Korean suppliers in their export of CDMA -despite the continuing ramp up in capacity, the company is reducing the manufacturing workforce by approximately 700 temporary workers Conference Call Notes: -Revenues could be up sequentially from quarter one because of higher sales of Q-phones and infrastructure deals. This quarter's (Q2) earnings will be comparable to last year's Q2. -the main news is that a big $60 million order of Q-Phones was cancelled and ASIC contract order was being pushed out of this quarter, which will have a significant impact for Q2's earnings. The contract however is still in place, but the Korean manufacturer had no demand against the contract. A major part of the $60 million contract would have been booked to Q2. -relative to 1st quarter, ASIC costs will be higher, lower royalties from Korea, no phone sales from Korea (however note that phone sales from Korea have never been significant) -ASIC revenue will be flat with volume increasing. There will be a lower ASIC shipment than predicted, which raised the cost margin. QCOM is trying their best to reduce costs. The majority of ASIC sales is to Korea. -there has been a softening of demand of Q-phones in the U.S., with a product mix change moving from the high end Q-phones to the lower end CDMA phones. This will result in lower Q-phone profit margins in the U.S. There is also potential pricing pressures from Korean manufacturers such as Samsung, who because of the won devaluation can sell their CDMA phones cheaper. However future ASIC demand could increase as Korea exports more. -an analyst estimated this news will result Q2 numbers coming in at 30 cents short of previous estimates -Korean's won devaluation will have the biggest impact in this quarter. Korean sales were strong in December, and will be somewhat lessen in the March quarter -the dual mode Q800 phone will be delayed because of a delay in obtaining the design specification and to complete FCC Testing -there is still a strong overall growth for CDMA demand