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

To: limtex who wrote (10923)	5/27/1998 7:34:00 PM
From: Sawtooth	Respond to of 152472

After close QCOM spin-off story: Wednesday May 27, 6:59 pm Eastern Time FOCUS - Qualcomm to spin off some wireless assets By Jessica Hall NEW YORK, May 27 (Reuters) - Telecommunications equipment maker Qualcomm Inc. (QCOM - news) said Wednesday it may spin off to shareholders certain investments in wireless phone companies. San Diego-based Qualcomm had invested in several start-up wireless companies in exchange for a commitment by the new companies to buy equipment from Qualcomm. Those deals helped increase the market for Qualcomm's equipment and technology. Qualcomm said the investments slated to be spun off have a book value of about $200 to $300 million. It now said spinning off those investments into a new publicly traded company would help its bottom line because it would no longer share the wireless companies' start-up losses and would be able to book equipment sales to the new company as revenues. Qualcomm would also be able to concentrate on other core businesses, such as manufacturing handsets for cellular phones and licensing its wireless phone technology, analysts said. ''It's an intelligent thing to do. An infrastructure company should not be permanently invested in the service provider business,'' said Ian Toll, an analyst with BT Alex. Brown. While Qualcomm aims to spin off investments in certain land-based wireless companies, it will retain its holdings in satellite-based wireless ventures. Qualcomm may keep up to a 20 percent stake in the new publicly traded company. This would allow it to benefit from any success these upstarts may enjoy while reducing its losses if the wireless companies fail to thrive, analysts said. ''They are hedging their bets,'' said David Berndt, a program manager with the Yankee Group, a market research firm. ''A lot of these (emerging) companies haven't hit day one yet on offering service. There is no income. Investing in them is like buying stock in a medical research company that hasn't hit it big yet -- you don't know whether or not they are going to find the next big thing,'' Berndt said. The separation would also prevent conflicts of interests with other Qualcomm customers who compete against these new wireless companies. Qualcomm wants to ensure there is no appearance of favoritism -- as far as pricing or service -- with the companies in which it hold investments, analysts said. The spin off will also allow investors to follow more accurately both sides of the company. Qualcomm said it believes that the value of its operating company investments is not fully recognized in the company's current stock price. Qualcomm eased $0.0625 to $53.4375 in afternoon trading on Nasdaq. Qualcomm said it will distribute the new company's shares as a dividend, which may be taxable to stockholders. If taxable, the dividend would be the lower of the average share price of the spun-off company's stock on the first day of trading or Qualcomm's accumulated earnings and profits through the end of fiscal 1998, which are expected to total $4.00 per share. Qualcomm will make a ''substantial funding commitment,'' including an up-front cash contribution and financing in the form of lines of credit or otherwise, to assit the new publicly traded company. Qualcomm expects the new company eventually to be self-sufficient, said company spokeswoman Christine Trimble. If the deal occurs, Qualcomm's president, Harvey White, will quit his post to become the new entity's chairman, president and chief executive. Qualcomm's chief operating officer, Richard Sulpizio, will take over from White as president, Qualcomm said. The deal is expected to be completed by the end of September. Separately, Qualcomm said China's Guangdong South Satellite Telecommunications Service Co. Ltd. agreed to test Qualcomm's OmniTRACS mobile satellite communications system in China later this year. The two companies agreed to commercially deploy the system if the trial proves successful.

To: limtex who wrote (10923)	5/28/1998 5:46:00 PM
From: John Cuthbertson	Read Replies (5) \| Respond to of 152472

For those who may be mourning over QCOM's stock performance in the past few years, let me present a little data I dug out of S&P's Compustat database: Annual Avg. Monthly Annual Year Low Close High FY95 20.500 33.047 54.750 FY96 30.375 43.677 54.500 FY97 35.375 49.312 65.016 FY98* 45.000 55.321 71.937 (through April.) To me, these numbers don't spell doom and gloom. In fact, they say that while the stock got way ahead of itself in '95, on the whole there have been consistent gains. And still, like most on this thread, I'm disappointed! But it may be useful to remind ourselves that we're disappointed not because we haven't seen any financial returns, but because we're expecting a hell* of a lot! And, I think, with good reason. Tero would assert that the difference in recent financial performance of Qualcomm and Nokia represents some kind of Wall Street verdict on the business prospects of GSM vs. CDMA. But in fact, it has to be recognized that there have been significant "external" influences at work. After all, Korea's economy did not collapse due to some flaw in CDMA, or any other factor over which Qualcomm had control. And Nokia frankly has been benefiting mightily from simply being a European stock: the average Continental stock market is up > 30% just since the beginning of the year, and Finland's up more than 50%. But this has more to do with the prospects of EMU than of GSM! Limtex, I think perhaps Gregg was a bit too harsh with you; it is fine to say that you care more about financial returns than about great technology. But just remember that what you need to care about is future financial returns, not historical ones, and great technology is relevant to that concern! ==John Cuthbertson P.S. Wish me luck, guys: I'm taking the Chartered Financial Analyst exam (Level I) on Saturday.