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Qualcomm meets Street
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July 19, 2000: 9:33 p.m. ET
Wireless firm in line with analysts' expectations; earnings up 40 percent
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NEW YORK (CNNfn) - Despite its recent setbacks in Asia, wireless technology provider Qualcomm on Wednesday reported pro forma third-quarter earnings that were in line with estimates and 40 percent greater than in the year ago period, driven by strong increases in royalties.
Qualcomm reported pro forma net income of $218 million, or 27 cents per share, compared to $156 million or 22 cents per share in the year ago quarter. First Call, which tracks analysts' estimates, had expected earnings of 27 cents.
 The San Diego-based company had revenue of $714 million, up 11 percent from $645 million a year ago.
For the first nine months of fiscal 2000, Qualcomm's pro forma net income rose 729 percent to $531 million, or 67 cents per share.
Qualcomm also reported license, development and royalty fees of $174 million, a gain of 38 percent compared to $126 million for the same period last year. License, development and royalty fees from third parties were $159 million.
"Our chip business met its third-quarter goal of shipping a record number of MSM phone chips, while aggressively preparing for and investing in new areas of growth including third-generation (cdma2000 and WCDMA) and HDR products," said Dr. Irwin M. Jacobs, chairman and CEO of Qualcomm.
"Our technology licensing business signed numerous license agreements during the quarter and we're seeing momentum build in requests for both new license agreements and 3G extensions by existing licensees," Jacobs said.
However, Qualcomm stock has been under pressure for most of the year on worries concerning licensing its CDMA (code division multiple access) technology in China and Korea, with the stock more than 68 percent off its 52-week high of 200.
"The recent stock price fluctuations remind us of the old days (pre-1999) when Qualcomm's earnings outlook was cloudy and the stock traded more on speculation than fact," Merrill Lynch analyst Michael Ching said in a research report issued Tuesday, ahead of Qualcomm's earnings.
"In the near-term, Qualcomm's earnings outlook has been diminisheddue to recent events in China and Korea," Ching said. "We maintain our intermediate-term 'neutral' opinion and maintain our long-term 'buy' rating."
Rich Sulpizio, Qualcomm president and chief operating officer, said during a news conference that Qualcomm's CDMA market share is growing and that for 2001, analysts estimate 90 to 100 million CDMA phones will be sold. The South Korean domestic market represents 20 to 25 percent of the phones Qualcomm sold.
"The ban on phone subsidies in South Korea could be reversed as it was earlier," said Sulpizio. "We believe the impact will be short term.
We estimate a sequential decrease of 2 to 3 million units in the September quarter, if other markets don't pick up the slack."
"We have a book to bill ratio less than one due to the decrease in phone sales in the Korean market," Sulpizio said. "While book to bill is a metric, it is not the only metric we use to measure performance."
Sulpizio also said he expects China, coveted for its lucrative market potential, will adopt CDMA instead of the European GSM wireless standard.
"I am confident they will deploy CDMA. The question is if it will be now or six months from now," he told Reuters after the earnings announcement.
In trading Wednesday, Qualcomm (QCOM: Research, Estimates) finished down 2-1/8, or 3.3 percent, at 63. Its shares fell further to 61-5/8 in after-hours trading. 
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Qualcomm
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