|
The Qualcomm-unist Manifesto
|
 |
November 7, 2001: 6:17 p.m. ET
Is there more to Qualcomm's latest earnings release than smoke and mirrors?
By David Futrelle
|
NEW YORK (CNNmoney) - Does everyone else see something I don't? I mean, Qualcomm actually closed up Wednesday (a mere 38 cents, but up just the same). That gain following an after-the-bell announcement on Tuesday in which the company said quarterly earnings were shy of estimates and that next quarter's would be too.
The stock had cratered in after-hours trading, and Wednesday's rebound cheered some Qualcomm bulls on the message boards - "oh yeah!!!!!!" cried one fan on the Yahoo! Finance boards. "stay long and be strong!!!!!!!"
I'm afraid I don't quite understand the excitement. Because when I look at Qualcomm's results I see a lot of smoke (and mirrors), but not much actual fire.
Qualcomm's press release - seemingly the length of a short novel - is a confusing mélange of pro forma results and jargon-ridden braggadocio. The company's results are generally pretty messy to begin with. But they were even messier this time, due in part to an accounting change that requires the company to recognize less of its licensing revenue up front. (Most of the Qualcomm's revenue comes not from selling products, but from its CDMA technology used in cell phones - Qualcomm gets licensing revenue from cell-phone manufacturers and service providers.)
No help here
And Qualcomm doesn't exactly go out of its way to make its results easy to understand. Indeed, patient readers had to wade through page after page of numerology and seemingly endless boasting about various technological and commercial accomplishments before stumbling upon the not-so-surprising ending to the story: Pro forma profits of 23 cents a share were actually a net loss of 6 cents a share, down from a 16 cent profit last year.
For next year, the company says it expects to see revenue growth of 15-to-25 percent - that seems to be what Qualcomm's fans chose to focus on Wednesday.
Like pretty much everyone else in the wireless sector, Qualcomm has been hurt this year by dismal phone sales and a slow rollout of "3G" wireless networks, which handle data far more efficiently than existing 2G networks. Qualcomm's stock is down more than 30 percent for the year, despite a marked run-up in the shares over the last month.
Still, many investors continue to have great faith in Qualcomm, though I suspect this faith stems more from memories of the stock's startling 2,621 percent gain in 1999 than it is from a close reading of Qualcomm's financials.
So here's a simple test. Consider this statement, taken from Qualcomm's earnings release:
"Earnings per share are computed independently for each of the quarters presented and for the fiscal year. Therefore, the sum of the quarterly net earnings per share will not necessarily equal the total for the year."
If this makes perfect sense to you, congratulations: you're already pre-approved to be a Qualcomm investor!
Sign up to receive the Tech Investor column by e-mail.
Plus, see more tech commentary from David Futrelle and Adam Lashinsky, and get the latest tech news. 
|
|
|
|
|
|
|
