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

To: Jon Koplik who wrote (21645)	1/20/1999 12:57:00 PM
From: mmeggs	Respond to of 152472

The joke's on you Jon! Live it up: HOLD MEDIUM CAP Qualcomm (QCOM) FY Q1:99 (Dec) EPS Better Than Consensus; QCOM Continues as Margin Recovery Story with Little Growth Summary Qualcomm reported FY Q1:99 earnings results yesterday of $0. 65 versus our $0.70 estimate and the $0.59 Street consensus. The tone of management was even on the conference call, though cautious overtones surrounding Qualcomm's prospects in Latin America and Russia/Ukraine continue to permeate the company's equipment sales and licensing/royalties opportunities. Positive EPS variance was driven by margin improvement in handsets, though sequential margin erosion was detectable due to poor infrastructure fundamentals. We are decreasing our preliminary FY99 and FY2000 estimates to roughly $2.50 and $3.00 from $2.70 and $3.30, respectively. We continue to maintain our Hold rating on Qualcomm, predicated on its inability to deliver communications equipment gross and operating margins commensurate with that of its peers after owning a relatively-dominant position in the CDMA handset market for nearly two years. Margin Story Versus Growth Communications Systems revenues of $817 million missed our estimate of $914 million by 10%, recording a 21% year-over- year increase. Management again cited the lack of Russian infrastructure equipment sell-through of roughly $29 million, of which the equipment has already been shipped. In addition , economic turmoil in the emerging markets has made it difficult for smaller operators to build networks. Handset unit growth was offset by price erosion of more than 20% ( possibly as much as 30% erosion is the norm in cdmaOne products, given tough competition from Korea). We believe that management emphasis on margin improvement via cost control implementations, compounded by cautious overtones point, like last quarter, to a much more tempered revenue growth outlook. Over the next several quarters, we believe that effects should follow the trend pictured in Exhibit 2-an upward trend in net margin, compromised by a degradation of sales growth due to price erosion and greater competition. [Nice call, Valueman.] That's all I can post. mmeggs