Qualcomm Inc (QCOM)

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Qualcomm's Quarter

November 4, 2004

Attributing its strong growth in the fourth quarter to the continued deployment of WCDMA networks globally, Qualcomm’s fourth quarter revenue saw an eye-bulging increase from last year. But warnings that next year might not meet expectations is causing some pull-back on the stock.

Revenues for the micro-chip maker climbed 27% from last year, to $4.9 billion in 2004, the company reported. Earnings were up 108%, to $1.7 billion, from 2003. Focusing on the fourth quarter, Qualcomm say $1.1 billion in revenue, a dip of 17% from the previous quarter but up 28% from last year.

The San Diego, Calif.-based company saw expenses rise 24% from the same period last year, to $146 million, and spent more on research and development during this term. Research and development costs rose 45% compared to the fourth quarter in 2003, to creep over the $200 million mark. The rise in R&D is “related to integrated circuit products and initiatives to support multimedia applications, high-speed wireless Internet access and multimode, multiband, multinetwork products including CDMA2000 1xEV-Do, WCDMA and High Speed Downlink Packet Access," the company stated.

The company sold some 39 million Mobile Station Modem phone chips during the final quarter of this year, 19 million more than it had sold during the same quarter in 2003. Qualcomm reported that this year saw an “insufficient channel inventory" of its MSMs and CDMA phones, due to booming interest, and while it sees that problem as being alleviated, it missed the mark on its 46 million unit estimate. Qualcomm is forecasting to ship 48 million to 52 million CDMA phones in the December quarter.

This inability to serve up all the demand for faster chips that power mobile phones as well as Qualcomm's altering the way it is accounting for royalties is contributing to the stock prices' dip of $1.36 in late morning trading, say financial reports.

“The continuing growth in the worldwide adoption of CDMA technology has significantly increased the cash flow and earnings of Qualcomm," stated Irwin Mark Jacobs, chairman and CEO at Qualcomm. "Clearly, the desire on the part of consumers and enterprises to utilize applications that require more efficient and faster data transmission is driving the deployment of CDMA2000 1xEV-DO and operator requests for earlier availability of High Speed Downlink Packet Access (HSDPA) for WCDMA."

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