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Qualcomm Quite Cheap

Posted on Friday, Nov 7th 2008

Yesterday, Qualcomm (Nasdaq: QCOM), which tops my Top 10 Semiconductor Stocks list, reported mixed fourth quarter and fiscal year 2008 results. Q4 revenue grew 45% y-o-y and 21% q-o-q to $3.33 billion and included the $560 million in licensing and royalty revenues received from Nokia as part of Qualcomm’s new agreement. Net income, however, was down 22% y-o-y and up 17% q-o-q to $878 million, or $0.52 per share as the company suffered losses of $327 million on financial investments. At the end of October, these losses increased to $1.3 billion. Analysts had expected revenue of $2.86 billion and earnings of $0.60 per share.

Its cash, cash equivalents and marketable securities were about $11.3 billion at the end of Q4, compared to $11.2 billion last quarter and $11.8 billion last year. It paid $266 million cash dividends in the quarter.

In fiscal year 2008, Qualcomm generated revenue of $11.14 billion, up 26%. Net income was down 4% to $3.16 billion or $1.9 per share. During 2008, it paid $982 million cash dividends and bought back shares worth $1.67 billion. 

By segment, Qualcomm CDMA Technologies (QCT) revenue grew 24% y-o-y and flat q-o-q to $1.76 billion. Qualcomm Technology Licensing (QTL) revenues increased 112% y-o-y and 71% q-o-q to $1.374 billion. In Qualcomm Wireless & Internet (QWI), revenue was down to 22% y-o-y and flat at $190 million.

In Fiscal 2008, QCT had operating margin of 27% and shipments of 336 million MSMs. QTL operating margin was 87% in 2008. ASP was $216 for Q4 and $219 for 2008, positively affected by about $13 by the weaker dollar.

Qualcomm made some management changes during the quarter: it appointed Len Lauer as chief operating officer, Steve Mollenkopf as president of QCT and Derek Aberle as president of QTL.

Based on reduced orders, Qualcomm expects fiscal 2009 revenues to be in the range of $10.2 to $10.8 billion, down 3% to 8%, and EPS between $2 and $2.10 per share. Analysts forecast revenue of $12.13 billion and EPS of $2.58. For the first quarter of 2009, the company expects revenue in the range of $2.3 to $2.5 billion and EPS in the range of $0.46 to $0.50 versus analyst estimates of $0.61. 

Despite the bleak economy, Qualcomm is well positioned in the 3G industry. According to Wireless Intelligence, 3G subscribers grew 33% y-o-y and numbered over 705 million at the end of September. They are expected to grow to 1.6 billion by 2012.

Also, Qualcomm has released the Gobi module that delivers embedded 3G connectivity in laptops. Acer, Dell, HP, Lenovo and Panasonic have announced their plans to use Gobi. The stock is currently trading around $33 with a market cap of about $54 billion. It hit a 52-week low of $32.21 on October 24. Another great company trading at a cheap price.

Chart for QUALCOMM Inc. (QCOM)
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