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

To: brian h who wrote (27246)	4/16/1999 10:20:00 AM
From: bananawind	Read Replies (2) \| Respond to of 152472

Brian, I am sure Gregg can answer for himself, but I believe the math he implies is as follows: -Infra was losing $150 million per year, pre-tax -Using a 33% tax rate, that implies net was impacted at $100 mil./yr. -$100 mil on 74 million shares = $1.35 per share. ie. getting rid of the division will immediately improve EPS at an annual rate of $1.35 after-tax. Best regards, Jim

To: brian h who wrote (27246)	4/16/1999 10:40:00 AM
From: Gregg Powers	Read Replies (1) \| Respond to of 152472

Brian I believe that QC's infrastructure business was generating an annual operating loss in, or around, $150mm. Why so big? First, the R&D investment was enormous, particularly in light of the limited revenue generation. Second, the company had to invest in a sales infrastructure, i.e. SG&A, in every market where it hoped to conduct business. Despite all the dollars committed to SG&A, these efforts produced insufficient revenue to support the overhead. Third, overall low volume levels results in depressed gross profit margins due to poor absorption of manufacturing overhead. Think about it this way. Assume QC generated $350mm in infrastructure revenue over the last four quarters, with 15% gross profit margin. This results in just $53mm in gross profit. Substract from this, approximately $130mm in R&D expense and and $70mm in global SG&A, and you get an operating loss near $150mm. You get the idea. Best regards, Gregg