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Qualcomm buys SnapTrack
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January 26, 2000: 3:06 p.m. ET
Wireless company pays $1B for tech firm; shares fall on warning
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NEW YORK (CNNfn) - Aiming to expand its Internet and mobile initiatives, Qualcomm Inc. agreed Wednesday to acquire SnapTrack, Inc., a provider of wireless technology, for $1 billion in stock.
The move comes just a day after Qualcomm, a wireless technology firm, reported fiscal first-quarter results that beat forecasts by a penny a share. However, the company's warning that CDMA chip and wireless telephone shipments might decline in its second quarter sent the stock sharply lower.
In mid afternoon trading, Qualcomm (QCOM) fell 13 percent, or 19-3/4, to 129-1/4. Late Tuesday, the wireless company reported fiscal first-quarter earnings that beat analyst estimates by 1 cent.
SnapTrack will become a wholly owned subsidiary of Qualcomm. The company's employees and headquarters will remain in San Jose, Calif.
Qualcomm expects to further its development of wireless technology for mobile phones and Internet devices by integrating technology from SnapTrack. The companies will work on applications to provide smart phones, PDAs and pagers with the capability of locating wireless 911 users and providing customized location-specific services.
"It's part of our strategy to move much more strongly into what we think is this new-coming trend, which is the wireless Internet," Irwin Jacobs, Qualcomm's CEO told CNNfn. "What we want to do is make sure there is a whole set of capabilities available."
Investors seemed more concerned with warnings issued by company executives Tuesday, who said that chip and wireless shipments might decline in its fiscal second quarter. That news prompted the stock to plunge in after-hours trading, and the sell-off continued Wednesday.
Qualcomm CEO Irwin Jacobs tried to quell investor worries and told CNNfn the chip sales in the second quarter would not match those in the first quarter due to seasonal factors. (480K WAV) (480K AIFF)
"The holiday quarter is always a very large quarter for the sale of phones," Jacobs said. "The following quarter is a little less."
Jacobs also said the company has continued to expand, mostly on its own, but is still interested in acquisitions, especially of Internet-related companies. (312 WAV) (312 AIFF)
Analysts appeared to be divided about the company's near-term future. Marc Cabi at Credit Suisse First Boston reiterated the stock at a "buy" rating and maintained his 2000 earnings-per-share figure of 94 cents, and a projected 2001 earnings-per-share figure of $1.27.
However, Michael Ching at Merrill Lynch downgraded Qualcomm, and said, "It is time for a breather." He reduced his intermediate term rating from "accumulate" to "neutral."
"There are some challenges on the horizon," said Ching in a research note. "Management indicated that seasonal factors -- inventory balancing and a transition to newer chipsets -- will have a negative impact on ASIC (chip) sales. We are concerned about the unpredictability of any product transitions and the impact this may have on the second half of fiscal 2000."
Ching did, however, maintain a long-term "buy" rating and kept the 2000 earnings-per-share outlook of $1.04, and set a 2001 earnings-per-share of $1.40. 
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Qualcomm
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