Qualcomm Insists Junk a Good Investment
First Quarter VC Investment in San Diego Firms Climbs to $387.5M
CYBERBUCKS
by Mike Allen, Senior Staff Writer
Qualcomm Inc. disclosed what it was going to do in January but investors may still be a bit amazed by the move.
That is, sticking a portion of the company’s considerable cash pile into below-investment grade bonds, better known as junk bonds.
“We’re diversifying a small portion of our $3 billion in cash portfolio by investing it in non-investment grade corporate bonds,” said Qualcomm treasurer Dick Grannis.
The prices for such bonds were at historic lows in recent months, and the returns are much better than investment grade bonds, so it seemed like a good time to jump in, Grannis said.
Grannis said the total invested in the higher-risk bonds rated below BBB so far is about $273 million, or about 10 percent of the portfolio’s cash position at the end of March. He noted the company has no debt and isn’t stashing all its cash into junk.
While he didn’t disclose specific corporate bonds the company purchased, Grannis said they included companies in practically every sector.
The rest of Qualcomm’s cash reserves are invested in much lower-risk instruments such as U.S. government bonds, investment grade corporate bonds, commercial paper and bank CDs, he said.
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San Diego Fifth In VC Funding: Venture capital investment in San Diego-based companies increased to $387.5 million in the first quarter, up 51 percent from the fourth quarter. However, that amount was down 41 percent compared to the first quarter of 2001, according to the latest PricewaterhouseCoopers Moneytree survey.
Jim Ingraham, a Pricewaterhouse partner, said San Diego’s results, which was the fifth highest among 10 regions in the nation, is a credit to the diversity of the area’s high-tech industries.
“What we see in this quarter is more money invested in total, yet fewer companies being funded,” Ingraham said. Looking at specific investments, the trend of mature companies garnering more funding continues, he said.
“There is not a lot of money going into seed and early stage deals.”
A total of 28 local companies obtained venture funding last quarter, with the average deal at $13.8 million.
Leading the list was local biotech CancerVax Corp., which received $55 million. Another biotech, Senomyx Inc., obtained $26.8 million.
Two high-tech firms were the next largest funding receivers: Magis Networks, $35 million, and Ensemble Communications, $25 million.
As has been the case in recent quarters, biotechnology and life sciences companies attracted the bulk of the VC money. But communications and networking made some nice gains after getting less than $29 million in the fourth quarter.
Looking at the VC investment picture nationally, the No. 1 region getting cash is still Silicon Valley, which received more than $2 billion last quarter. It was followed by New England, $829 million; L.A./Orange counties, $432 million; New York, $413 million; and San Diego.
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Cubic Net Profit Increases: Cubic Corp. reported net income for its second quarter ended March 31 increased 30 percent from the like period a year earlier to $6.4 million, compared to $4.9 million in the same period in 2001. Revenues also increased for the quarter 13 percent to $138.5 million, compared to $122.8 million in the second quarter of fiscal 2001.
For the first half, Cubic earned $12.1 million on revenues of $262.4 million compared to net profits of $9.6 million on revenues of $243.1 million for the first half of fiscal 2001.
Cubic said both its divisions , defense and transportation , reported strong results, but the largest increase came in defense.
As of March 31, total backlog of orders was $1.2 billion, compared to $1 billion in the previous year’s second quarter.
Cubic completed a three-for-one stock split last week. After it closed at $72 on April 30, Cubic, traded as CUB on Amex, gained $1.35 on its opening price above $24, or 5.63 percent to close May 1 at $73.35. Trading volume was more than three times the average.
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Maxwell Loses In First: Maxwell Technologies, Inc., the San Diego maker of power and computing components and systems, reported a net loss of $5.5 million on revenues of $14.3 million, compared to a net profit of $574,000 on revenues of $27 million for the first quarter of 2001. The 2001 first quarter results included profits on the sale of Maxwell’s defense contracting business.
While it reported an increase in sales of power and computing systems, it also suffered a decline in sales of electronic components. Maxwell also had to take a restructuring charge of $266,000 during the quarter to cover a layoff of about 30 employees. Maxwell now has 450 employees worldwide, including 329 locally.
The company also converted stock and options in two of its subsidiaries, I-Bus/Phoenix and Electronic Components Group, into shares of the parent company. To accomplish this, Maxwell issued 564,794 shares in exchange for shares in the two subsidiaries. Traded on Nasdaq, Maxwell closed at $9.49 May 1, while its 52-week range was between $5.81 and $22.50.
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Peregrine Dives: Peregrine Systems Inc., the San Diego maker of asset management software, delayed release of its fourth-quarter and full-year results last week, which sent its stock into a free-fall.
At the close of Nasdaq trading May 1, it lost $3.40, or half its previous value, ending at $3.45. That made it the biggest loser on Nasdaq for the day.
Peregrine said it postponed release of the results because new auditor KPMG, which replaced Arthur Andersen last month, needed more time to check the figures. The company said it would provide new information this week about when it will release results.
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