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

To: waverider who wrote (8490)	2/12/1998 6:20:00 PM
From: JMD	Read Replies (1) \| Respond to of 152472

Diamond H, were you not the 'tall blond guy at the end of the table' and might we have some idea of your part in <i l'affaire Jasmine?> This just keeps going from bad to worse: now there are intimations of glandular excess, or in the fair Amy's own words "adrenaline rushes"" Subject: Re: Annual meeting Date: Thu, Feb 12, 1998 14:11 EST From: Amycomp Message-id: <19980212191101.OAA03630@ladder02.news.aol.com> I, too, attended the annual meeting. I was twice at the microphone trying to understand the infrastructure business (yes, those who attended, that was me on camera from the outer sanctum). Ajit, as requested, this is my summary of my questions and responses about infrastructure... First time at the mike (hands shaking...I get huge adrenaline rushes when I speak in public): Q (paraphrase): I have a few questions about your infrastructure business, as seems to be an important part of your strategy going forward. Are you operating at breakeven on your infrastructure business? Given the recent surprise from you longtime Korean customers, how comfortable are you with the political and currency risk of your infrastructure business, which requires you to provide long term financing in countries such as Russia, the Philippines, China and the Congo? A (paraphrase): Not currently at breakeven levels; breakeven is greater that $500M in sales. (I believe Lehman sets it about $600M). Contracts are in US$ so currency risk is in ability to repay in dollars, not translation. Try to choose their partners carefully. Where possible try to get credit support from local government agencies as well. Acknowledgement that there is of some political risk involved but emphasize that this is a product that these countries need that that wireless installation is easier than wireline. (Anyone else who attended please embellish... adrenaline limited my note taking ability.) Q2: A follow up to my previous infrastructure question, if you are successful in your infrastructure business, how do you intend to finance its growth? Should we be expecting any changes in your balance sheet as this business grows? For example, historically QCOM has prided itself on its low leverage but with increasing business in long term financing receivables, will your leverage increase or will you issue additional potentially dilutive convertible securities to finance the business? A2: (Thornley, CFO, tackled most of this one) QCOM is in the process of setting up a long term bank line. This would balance long term asset requirements (finance LT assets, such as capex or LT Receivables, with LT debt). In conversation with a number of banks including Citibank, JP Morgan, Bank of America. More importantly, however, QCOM is also in conversation with 20 banks about a program to lay off the receivables risk by selling the receivables. (Sounds like some type of securitization of the receivables to me). While convertible securities or equity solutions remain an option, right now QCOM is focussing on long term banking and strategic relationships and is not contemplating an equity-related offering. FWIW, my take on the state of the infrastructure business: As I believe we knew, it is currently not profitable. There wasn't much of an answer to allay any fears of political risk with respect to the countries with whom business is being done. (However, I can't think of what they could say to calm those fears other than some type of US gov't agency guaranteed financing to promote exports). If the finance receivable sales program is non-recourse, then this could provide some risk relief in the future but for now QCOM retains long term foreign country risks. Jacobs did also mention at some point QCOM's strategic partners (Nortel, Hughes, etc) in infrastructure. More in a separate post. This is getting pretty long. Pretty long and pretty suspicious if you ask me! Mike Doyle