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

To: Caxton Rhodes who wrote (8713)	2/20/1998 4:43:00 PM
From: Caxton Rhodes	Respond to of 152472

Form Microsoft Investor: Qualcomm (QCOM) is a tougher company to analyze. Its technological edge is much less certain and its market share very uncertain. That makes getting a read on management's skills absolutely crucial. After applying my management quality stock price deflator I'm going to keep Qualcomm in Jubak's Picks. Just weeks after announcing record results for the three months ending Dec. 28, 1997 -- its first fiscal 1998 quarter -- Qualcomm CEO Irwin Jacobs laid a bombshell on investors. Korean manufacturers were canceling or postponing orders for the Qualcomm computer chips used to make phones, and another Korean company had canceled an order for completed phones. The company moved to lay off 700 workers. Wall Street analysts rushed to cut estimates. ABN-AMRO Chicago, for example, sliced its estimate to $1.50 a share for fiscal 1998 from its previous $2.40, and to $2.30 for fiscal 1999 from $2.40. None of this reflects well on management -- and the deeper I dig, the more concerned I become. Since I assume that management wasn't deliberately misleading investors when it said on Jan. 20 that everything was OK with Korean orders, I have to believe that the company was blindsided on developments in one of its key markets. Furthermore, inventory at the company seems to be badly out of balance. Management has too many state-of-the-art Q phones in the warehouse and not enough of the older QCP phones. Management is also showing an unsettling tendency to keep counting its chickens before they hatch. For example, in a conference call with Wall Street analysts to explain the Korea misstatements, management said that any company developing phones to meet the recently adopted European standard for the next generation of wireless phones will need a license from Qualcomm. That conclusion seems a trifle premature to me. Qualcomm isn't an easy company to manage, I grant, which is exactly why the quality of management is so important. It's growing at an incredible rate -- revenues climbed to $1.9 billion in fiscal 1997 from just $713 million in fiscal 1996. And those revenues come from a complex mixture of businesses, some of which constantly threaten to cannibalize other parts of Qualcomm's revenue stream. About 10% of revenues come from licensing technology to companies that sell phones in competition with Qualcomm. Other revenue comes from selling chips to phone makers. Still more comes from selling phones in competition with licensees and the companies that buy chips. Add in Qualcomm's ambitious plans to sell wireless-phone infrastructure equipment and its partnership in developing a global satellite system, and management has a very full plate. The case for buying Qualcomm rests on fiscal 1999 earnings. If the current problems are indeed temporary and earnings for 1999 remain at $2.30 a share, this is indeed a $69 stock in a year (assuming the current 30 price-to-earnings ratio). That would be a 46% return from the current price of $47. I don't think this management is likely to navigate the current tricky market without mishap, however. Qualcomm faces increasing competition from Nokia (NOK/A), Ericsson (ERICY) and Motorola (MOT) in the CDMA market. Motorola, for example, will have its own CDMA phone to market this year, and while Qualcomm has a sizeable lead and Motorola has its own management problems, the pressure is definitely on. So I'd apply an earnings deflator to the company's fiscal 1998 results. Instead of a rebound in the fourth quarter after two quarters of weakness, I'd push the recovery out a quarter. I think that would, in turn, knock about 20 cents off 1999 earnings and gives me a target price of $59. ($2.10 a share in earnings multiplied by a slightly lower price-to-earnings ratio of 28). That's still a 25% return from the current price of $47. That still meets my goal of a minimum 20% return on a risky stock like this. So after applying my management-quality stock-price deflator, I'm going to keep Qualcomm in Jubak's Picks. I'm just hoping that management is no worse than so-so.

To: Caxton Rhodes who wrote (8713)	2/20/1998 4:44:00 PM
From: kech	Read Replies (2) \| Respond to of 152472

Does anybody know which auto company has 1% of their business in Telecom? I would figure that Hughes would be more that 1% of GM. Is Volkswagen into Telecom? Could Volkswagen be the stalking horse for CDMA into Europe? Check out this article: Headline: INTERVIEW- Qualcomm (NASDAQ:QCOM) talks with automaker ====================================================================== PHILADELPHIA, Feb 20 (Reuters) - Qualcomm Inc has been in discussions with an automaker that is planning a major expansion into telecommunications over the next decade, President Harvey White said on Friday. White declined to identify the automaker in an interview, but he described it as "one of the top four or five automotive companies in the world." "They have 1 percent of their business in telecom today. They expect 10 percent of their business to be in telecom in 10 years," he said. White described Qualcomm's discussions with the company as focusing generally on future automotive needs for wireless products and services. "We're having discussions with various companies, including an auto company, about what their plans are for the future, because we're trying to figure out what our plans are in terms of what kind of products and services we might be able to provide. It's really an issue of trying to understand the industry," the executive told Reuters. Earlier, White said in remarks at a communications conference hosted by the University of Pennsylvania's Wharton School that the automaker saw telecom as its future. PHILADELPHIA, Feb 20 (Reuters) - Qualcomm Inc has been in discussions with an automaker that is planning a major expansion into telecommunications over the next decade, President Harvey White said on Friday. White declined to identify the automaker in an interview, but he described it as "one of the top four or five automotive companies in the world." "They have 1 percent of their business in telecom today. They expect 10 percent of their business to be in telecom in 10 years," he said. White described Qualcomm's discussions with the company as focusing generally on future automotive needs for wireless products and services. "We're having discussions with various companies, including an auto company, about what their plans are for the future, because we're trying to figure out what our plans are in terms of what kind of products and services we might be able to provide. It's really an issue of trying to understand the industry," the executive told Reuters. Earlier, White said in remarks at a communications conference hosted by the University of Pennsylvania's Wharton School that the automaker saw telecom as its future. "They see telecom replacing the automobile," he told an audience consisting mainly of business students, academics and company executives. "They see, that with the virtual workplace, we'll be able to deliver to the workplace and to the person information, and we won't have to take the person to the place. And they think that if they aren't on the leading edge of this change in how people are going to live and work, that they will not have the kind of market capitalization and ability they do." The world's four largest automakers are General Motors Corp (NYSE:GM), Ford Motor Co (NYSE:F), Toyota Motor Corp (TOKYO:7203), Volkswagen AG (FSE:VOWG) and Chrysler Corp (NYSE:C).