54.3 F
San Diego
Thursday, Mar 28, 2024
-Advertisement-

Qualcomm Gains on Stock Front; Digital Wars Heat Up

The guys running Qualcomm Inc. may be running scared, but in business that’s a good thing.

After showing some slides of its record financial results at the annual shareholders meeting March 8, Chief Executive Officer Paul Jacobs said the numbers should convince competitors that Qualcomm is not a pushover if they choose to pick a fight.

“It says to our competition that they’re not going to put us out of business if they come after us,” Jacobs said, to about 500 shareholders gathered at Qualcomm’s headquarters building in Sorrento Mesa.

Last week’s conclave of Qualcomm stockholders was a relatively serene meeting, a far cry from a year earlier when the stock was trading about $38, and investors openly questioned the leadership’s decisions. On March 9, shares closed at $55.

“What a difference a year makes,” said one satisfied investor.

Indeed, it’s hard to fault Qualcomm’s recent performance. For its 2011 fiscal first quarter ended Dec. 26, the wireless chip maker reported record results in earnings, revenue and chip shipments.

For the 2011 fiscal year, it revised its annual forecasted revenue upward to range from $13.6 billion to $14.2 billion, up 24 percent to 29 percent from 2010 sales of $10.99 billion. Diluted earnings per share for this fiscal year were forecast from $2.32 to $2.46, up from last year’s per share net profit of $1.96.

At Forefront of Chip Business

Jacobs said Qualcomm’s chip business maintains a leadership position, and it continues to benefit from ever-increasing sales of smart phones and tablets.

The company’s chip set lineup covers an array of products for second-, third- and fourth-generation phones that are more complex and put heavier demands on batteries, Jacobs said.

To solve the issue, Qualcomm created new types of microprocessors branded under Snapdragon that are incorporated into several new devices. Jacobs said a partnership with Microsoft that uses its Windows operating system with Snapdragon processors is a “huge opportunity.”

While Qualcomm is a “fabless” chip maker, meaning it contracts out for its manufacturing, it became directly involved in the making of a new e-reader device called Mirasol. The e-reader resembles Amazon.com Inc.’s Kindle but shows color and video. Jacobs said Qualcomm is building a plant in Taiwan that is five times larger than an existing fab now making the devices. The investment is costing a reported $975 million.

Justifying the cost, Jacobs said the move was necessary to spur the market, and is similar to actions the 26-year-old company took in its early days when it began manufacturing cell phones.

Lessons From Losses

But not all of Qualcomm’s recent risks have been successful. Last year, it decided to exit its Flo TV business, which allowed users to view broadcast television shows on dedicated phones.

“It turned out that people didn’t want to watch TV on a handset,” Jacobs said. “Unfortunately, it didn’t work, but you have to take those kinds of risks.”

In its first quarter, Qualcomm said charges related to shutting down the unit were $64 million, and will likely total $300 million to $375 million in this fiscal year.

A much bigger risk involves its pending purchase of Atheros Communications Inc., a Santa Clara-based maker of semiconductor chips used in Wi-Fi devices and networks.

Announced in early January, Qualcomm offered $45 a share, or about $3.1 billion, for the company with 2010 revenue of $928 million and 1,800 employees.

On March 7, Atheros said it had to delay a shareholder vote on the sale until March 18 because a court ruling requires additional disclosure, including promises made to its chief executive and advisory fees paid to investment bank Qatalyst Partners, whose principal, Frank Quattrone, made his name during the dot-com boom.

Answering a question about job creation in this country, Jacobs said he’s trying to get the federal government to change its taxation laws so that Qualcomm and other firms doing heavy business overseas can return the bulk of their profits stateside and create jobs here, as well as increase dividends to shareholders.

As for its current dividends, Qualcomm raised it by 2.5 cents a quarter to 21.5 cents per share, increasing the annual payout to 86 cents per share, up from a total payout of 76 cents in the prior fiscal year.

-Advertisement-

Featured Articles

Oberon Eyes Europe for Renewable DME

Leaders of Influence in Law 2024

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-