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Wireless Analysts disagree on Qualcomm Inc

Wireless: Views Vary On Telecom Giant

Analysts can’t seem to agree on the prospects for San Diego-based Qualcomm Inc., whose stock price is dipping and bobbing like apples at a Halloween carnival.

It was only on Oct. 5 that Qualcomm’s share price scraped against a low of $38.31 , a point it had not reached in more than two years.

Last week ended, however, with other analysts talking up Qualcomm.

JP Morgan H & Q; raised its rating on the stock from “long-term buy” to “buy” Oct. 11. Qualcomm opened that day at $47.47 and topped $50 before closing at $49.68.

The San Diego high-tech giant makes semiconductors and licenses a technology for wireless telecommunications called Code Division Multiple Access, or CDMA. It began its 2002 fiscal year Oct. 1.

The news seemed bad for Qualcomm at the beginning of the month.

That was when wireless carrier Nextel said it would not switch to Qualcomm technology as it improves its network.

US Bancorp Piper Jaffray analyst Samuel May put out a research report Oct. 5, knocking 4 cents off his fiscal year 2002 earnings per share estimate. May lowered the estimate from $1.23 to $1.19.

That, however, contrasted with an Oct. 8 analyst poll by Thomson Financial/First Call, which put fiscal 2002 earnings at $1.25 a share.

Among other things, May said declining interest rates could hurt Qualcomm’s income from interest.

Interest counted for 23 percent of Qualcomm’s net income last quarter, he noted.

May also expressed concern about delays in rolling out Qualcomm’s CDMA2000 technology.

Korea is using it, but Japan is waiting until 2002. Domestic carriers are no longer rushing to put it in place this year, he added.

Nevertheless, May’s report noted Qualcomm’s “long-term business fundamentals remain intact.”

Qualcomm has long asserted that it will gain royalty income when current wireless networks evolve into their third generation , which is known in technical circles as 3G.

Furthermore, Qualcomm says it will gain royalty income if carriers choose either of two paths to 3G.

They are:

– CDMA2000. This is an evolution of the standard called CDMA One.

– Wideband CDMA, or WCDMA. This is an evolution of competing standards called Global System for Multiple Communications (GSM) and Time Division Multiple Access (TDMA).

“Qualcomm has been successful in licensing its intellectual property across 3G standards (WCDMA and CDMA2000) and is thus well positioned to reap royalty and product revenue for some time to come,” said an Oct. 2 report from Dain Rauscher Wessels.

An Oct. 4 report from C.E. Unterberg, Towbin called Nextel’s decision on switching to Qualcomm technology “primarily psychological.”

But bad news from Nextel is bound to hurt, the report noted.

“Any justification perceived to impact the outlook for 3G or the GSM community would be of greatest negative impact to Qualcomm and would reinforce the perception of CDMA 2000 as a niche standard,” it said.

“Qualcomm and the pending proliferation of CDMA is not a question of ‘if?’ but ‘when?'” the report said at another point. “This thesis remains intact.”

C.E. Unterberg, Towbin makes a market in Qualcomm securities.

Qualcomm will announce its fourth-quarter earnings on Nov. 6.


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