Qualcomm's Numbers Look Great

Article Submitted by: William Li
Stocks - Options - Mutual Funds


Tags: Sandisk, Qualcomm.

Qualcomm's earnings report on July 24 looks great. The stock should be much higher. This is one of the few cases with tech stocks where the market is overpricing risk.

 

Submitted: Jul 26, 2007    Views: 716    Comments: 4    Likes: 16   


Qualcomm's third quarter financial results really looked fantastic and the company also raised its outlook for the current period, despite its description of the next few months as a "crucial litigation time frame" in its patent-infringement fight.

The company reported earnings of $798 million, or 47 cents a share, for the quarter ended July 1. (vs. earnings $643 million, or 37 cents a share, for the same period last year when stock traded at $52).  Excluding charges related to stock options, the company said earnings would have come in at $934 million, or 55 cents a share, for the quarter (beating the street's 52 cent estimate).  Revenue grew 19% to $2.33 billion from $1.95 billion, beating the $2.27 billion expected by analysts.

The company saw revenue grow across its business lines. Its chip segment, for example, posted revenue of $1.37 billion for the quarter, up 21% from the previous year.  Also, Qualcomm's licensing unit boosted revenue 20% to $766 million, while its wireless and Internet segment grew 10% to $196 million in revenue.
 
The company lifted its revenue forecast for the fourth fiscal quarter to a range of $2.15 billion to $2.25 billion, an increase of 8% to 13% from its prior guidance. It expects earnings per share to fall between 48 cents and 50 cents for the period.  (Analysts had been expecting earnings of 47 cents a share on revenue of $2.21 billion for the quarter.)

This company faces tremendous challenges to its patents from Broadcom and Nokia.  The company has been very upfront about this risks, yet continues to guide up.  While these risks may affect this growth, there is no doubt that the company is continuing to grow as it sits at the centerpiece of the wireless growth in China and Asia.
 
This entire situation reminds me a little of what SanDisk went through earlier in the year - people questioning their patents and the recovery in their chips. Our market may be slowing - but the stocks that I want to own here are those that have the key IP relating to the few growth sectors in technology.  I am staying long Qualcomm (and Sandisk.)




Related Articles:



16

Email this story Email to someone | Print Story Print Content | Add to reading list

Comments Received:

Jeremy Artish

Qualcomm's numbers may look great, but these patent problems are here to stay.

Posted: Aug 7, 2007

Mkhan
Mkhan

Qualcomm should have gone much higher over the last 18 months, but instead it has been one misstep after another and the stock has gone from 53 to 37 in a strong economy. I don't think it is going to recover soon.

Posted: Aug 15, 2007

AronLiv
AronLiv

I think that Qualcomm is a fallen angel. Their hubris caused them to completely bungle the patent situation and now their chips are barred from US markets and their customers (Verizon and Sprint) are completely alienated. To boot, their W-CDMA licensing fees are causing the Asian carriers to start moving over to lower cost WiMAX systems. The parellels with Microsoft are scary. I am kicking myself for not selling at 53, but I had no idea that they would screw everything up so badly. I am dumping here. I don't know if it will go lower, but I see no catalyst for a recovery. I held it for 9 years. Wish I had sold in 2000, but it has been a good investment.

Posted: Aug 24, 2007

jME
(Unregistered)

The stock is very reasonably priced and it has always had the most brilliant people working for it. This company has historically rallied at precisely the moment that everyone leaves it for dead. So I wouldn't count them out yet.

Posted: Aug 24, 2007



Add Your Comments:

Your Name:

Spam protection control:


© Copyright 2008 William Li All rights reserved. William Li has granted BestCashCow.com, LLC non-exclusive rights to display this work on Bestcashcow.com.

Financial products of all nature bear inherent risks and this website is not a financial advisory service; it is a forum for users to share and to compare notes and observations on financial publications. The website provides, free of charge, the technical and logistical apparatus and the medium for users to share and to publish financial information and to comment on publications. As such, the website’s operator can not and does not take responsibility for information, observations or opinions of any sort or nature provided by third parties with whom it is not affiliated who use the website to publish, to comment or as a means of solicitation. Users are specifically warned against following any advice related to specific instruments, including, but not limited to, equity securities, that may be provided by other users directly on this site or on web pages to which other users have provided links on this site. BestCashCow.com can not and does not check or verify the qualifications and credentials of users who publish or comment on this site or on linked pages. Users should seek personalized advice from qualified professionals regarding all personal financial issues and evaluate the risks and applicability to their own circumstances of each financial product discussed regardless of who the publisher is or purports to be. Should you, through your use of this site, identify an individual or organization purporting to offer personalized advice, you bear all responsibility to ensure that the individual or organization has the qualifications that they may represent on the website, and that their advice is appropriate for your circumstances. On certain webpages, BestCashCow.com provides information related to rates on US-based savings accounts, CDs, short-term government bonds, and other US cash equivalent securities, also free of charge to internet users for their independent use. The accuracy of this information is not guaranteed, and the information, like all other information on this website, should not be construed to provide investment advice, nor to endorse a financial product of any sort.

© 2007 BestCashCow.com, LLC. All Rights Reserved. Terms under which this service is provided to you. Privacy Policy.