Wireless: Analysts Say Impact on Stock Should Be Minimal at Most
The days leading up to Qualcomm Inc.’s first quarter earnings report featured a sign from the sky: Globalstar Telecommunications Ltd., a satellite telephone company that uses Qualcomm technology, missed a debt payment.
Like an eclipse, the event looked ominous, but to Qualcomm analysts it was less so.
San Jose-based Globalstar issued a statement Jan. 16 saying it held back $45 million in payments due Jan. 15 to its co-founders, San Diego-based Qualcomm and New York City-based Loral Space & Communications Ltd.
The statement said Globalstar had “suspended indefinitely principal and interest payments on all of its funded debt, including its credit facility, vendor financing agreements and senior notes.” The move would free up cash to let Globalstar operate and market its services, the statement said.
Published reports say Globalstar is adding customers more slowly than expected.
Qualcomm analysts said they weren’t sweating the missed payment.
“I don’t think it really affects the (Qualcomm) stock,” said Brian Modoff, an analyst with Deutsche Bank Alex. Brown in San Francisco.
Like analysts cited in other published reports, Modoff said he expected to hear earnings of 28 cents per share when Qualcomm reports results from its first quarter, ended Dec. 31.
The earnings announcement is scheduled for 1:30 p.m. Jan. 25.
Modoff said his earnings projection is unchanged from his position before the Globalstar announcement.
For its part, Qualcomm “remains comfortable” with the analyst consensus estimate of 28 cents pro forma earnings per share, Qualcomm publicists said in a statement released Jan. 16.
As of Dec. 31, Qualcomm had approximately $610 million of net assets wrapped up with Globalstar, counting receivables, inventory, deferred costs, unearned revenues and investment-related assets.
“The company expects to reserve a significant portion of its Globalstar-related assets and incur a small negative impact to operating earnings in its first fiscal quarter,” the Qualcomm statement said.
Qualcomm “wrote a lot of that down and will take a small charge in the current quarter,” Modoff said.
Qualcomm reported net income of $177 million on revenues of $1.12 billion in the first quarter of fiscal 2000.
Qualcomm reported pro forma net income of $835 million on pro forma revenues of $2.76 billion for fiscal 2000.
Qualcomm’s stock closed at $71.81 per share before the Martin Luther King Jr. holiday weekend. It dipped to a $70.93 closing price Jan. 16 and rose to a $73 closing price Jan. 17.
In other recent news, Qualcomm announced Jan. 10 that its board named President and COO Richard Sulpizio to the board seat formerly held by co-founder Andrew Viterbi. Viterbi retired last spring but it was unclear from company information when Viterbi resigned from the board.
Shareholders will be asked to re-elect Sulpizio at Qualcomm’s annual meeting Feb. 27.
