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Qualcomm profits rise
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January 25, 2000: 7:51 p.m. ET
Wireless-tech outfit beats expectations, but stock dives on 2Q outlook
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NEW YORK (CNNfn) - Qualcomm on Tuesday reported a fiscal first-quarter operating profit that was slightly ahead of expectations.
But a warning from executives that product shipments could fall during the current quarter knocked some wind out of the company's high-flying stock in after-hours trading.
Excluding non-recurring charges, the wireless-communications technology provider logged earnings of 25 cents per share during the period ended Dec. 26. That was a penny better than analysts polled by earnings tracker First Call had expected.
Revenue came in at $1.1 billion, up from the $941 million in revenue Qualcomm posted during last year's fiscal first quarter.
Including charges, Qualcomm reported net income of $177 million, or 23 cents per share, up from $48.5 million, or 8 cents per diluted share, during last year's fiscal first quarter.
The recorded one-time charges of $24 million related primarily to the divestiture of its consumer wireless-phone production business, which it agreed last month to sell to Kyocera Corp. of Japan for an undisclosed amount.
The company also said it expects to record more charges for the sales of that business during the second quarter, but added that they would be more than offset by gains on the sale of investments.
The San Diego company -- which holds key patents and collects royalties on a mobile-phone technology known as "code division multiple access," or CDMA -- reported its earnings after the closing bell.
In Nasdaq trade Tuesday, Qualcomm shares advanced 8-15/16, or 6.4 percent, finishing at 149. In after-hours activity, the stock declined 10-15/16 to 138-1/16.
Market observers attributed the slide to Qualcomm's warning that shipments of CDMA chips and wireless telephones could decline in the second quarter compared with the first.
Executives at Qualcomm pointed out, however, that the anticipated drop-off in sales is due to seasonal factors, inventory balancing by customers spurred by shortages of other telephone components and a transition to newer chips.
"We see this as being a temporary situation, as the CDMA market continues to be strong," Anthony Thornley, Qualcomm's chief financial officer, told analysts in a conference call Tuesday evening.
Thornley also said that investors should begin looking at Qualcomm's business without the wireless handset business, the sale of which is expected to be completed next month.
Excluding the operating results of that business as well as the one-time items, Thornley said the most recent quarter's earnings were 27 cents per share. He also said that the company expects to meet or exceed Wall Street's earnings-per share targets for the fiscal second-quarter as well as the full year, which First Call currently has pegged at 25 cents and $1.02, respectively.
Adjusted for splits, shares of Qualcomm have advanced more than 1,800 percent from 7-1/2 a year ago.
"Clearly, its not a disaster, but we are looking at a little bit of a slump in the chipset business," said Mark McKechnie, an analyst at Bank of America Montgomery in San Francisco.
"Some people probably were looking for a little more upside on the quarter, and the fact that they're guiding for a potential downturn in the chipset business I think has some people a little bit concerned," McKechnie added.
And Qualcomm shares, which have been extremely volatile in recent months, could get even bumpier in the short term, noted Edward Snyder of Hambrecht & Quist.
"Any kind of guidance toward flat or even moderate growth will probably hurt the stock, given its current valuation," he said in an interview on CNNfn's Street Sweep program Tuesday.
"The best way, I would say, to play Qualcomm is to play the volatility," Snyder added.
Separately, Qualcomm reported in documents filed with the Securities and Exchange Commission on Tuesday that chairman and chief executive Irwin Jacobs received a $35.4 million compensation package in fiscal 1999 as a reward for the company's stellar performance.
Jacobs, 66, received $773,085 in salary and a $975,000 bonus for the 1999 fiscal year which ended Sept. 26, according to the company's proxy filed with the Securities and Exchange Commission on Tuesday. He also received a stock option grant to purchase 400,000 shares of Qualcomm common stock at an exercise price of $83.50 a share, worth about $33.4 million at that price, according to the filing. 
-- from staff and wire reports
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