Qualcomm Slams Investors With New Targets (QCOM, QQQQ)

Qualcomm Inc. (NASDAQ: QCOM) is falling into the category of the stocks we wanted to avoid this earnings season.  That category is companies with mediocre or poor earnings reports after shares have risen considerably from last year’s lows.  The company was expected by most to have very strong earnings based upon the CDMA push and the push into more and more smartphones.  Tonight’s action may be unforgivable considering how many were expecting strong earnings.

The maker of the Snapdragon chipsets for smartphones said its net income more than doubled, but much of that came from investment income.  Net income was $841 million, or $0.50 EPS.  The non-GAAP earnings used by analysts was $0.62 EPS. Revenue was up about 6% to $2.67 billion.  The Thomson Reuters consensus data had estimates of $0.56 EPS on $2.7 billion in revenues.  Qualcomm ended with cash and equivalents and marketable securities of about $18.9 billion at the end of this last quarter.

What is hard to fathom here is that a subdued recovery and a slow return of the economies in Europe and Japan matched by a greater demand for cheaper and cheaper phones were going to make the company hit the ‘*69’ on revenue targets.  The recent hype around smartphones and the inclusion of its chips in many netbooks and tablet-type devices at CES just makes this baffling.  Jim Cramer had this pegged as a mobile web winner, but that turns out to not be the entire case.  We even saw two very positive analyst calls at the start of this month based upon much of the same expectations.

For the coming quarter, Qualcomm sees $0.49 to $0.53 EPS on revenue of $2.4 to $2.6 billion, but Thomson Reuters had estimates of $0.57 EPS and $2.75 billion in revenues.  The earlier sales range was $10.5 to $11.3 billion for the fiscal year 2010, but the company is now targeting $10.4 to $11 billion in revenue.  The good news is that the firm maintained its $2.10 to $2.30 EPS targets for 2010 that it had previously offered.  The bad news is that Thomson Reuters consensus data was at $2.26 EPS and $11.06 billion in revenues.

The estimates are not changing so much for the devices in CDMA and WCDMA units.  But today’s forecast is one of its sell-thru prices.  The company was previously looking for average sale prices of $189 per unit.  The new figure is $181 per unit, representing a drop of 4.2% per unit in pricing.  It seems that the thriftiness of consumers is running all the way up the chain.  Sell more for less, or they go elsewhere.

Shares closed up 0.66% at $47.20 versus a prior 52-week range of $32.64 to $49.80.  Shares are down 10.5% at $42.30 as of 5:23 PM EST.  This is a huge disappointment all around.  Perhaps the issue keeping this from looking even worse tonight is that QUALCOMM’s move from trough to peak was ‘only 50%’ in the last year.  That is actually tame for many key tech stocks.  Even the PowerShares QQQ (NASDAQ: QQQQ) have moved 82% from trough to peak over the trailing 52-week period.

There is just no way to paint this guidance in a very positive light other than hoping that Paul Jacobs is just sandbagging guidance to make the targets easier to hit.

JON C. OGG