Zoom Rides Qualcomm Coattails, Reverse Merger Memories (ZOOM, QCOM)

ZOOM Technologies, Inc. (NASDAQ: ZOOM) is surging this morning and what is interesting is that there could still be room above if the China syndrome  of reverse mergers doesn’t act as a continued overhang.  The company signed a pact with QUALCOMM Incorporated (NASDAQ: QCOM) to make smartphones using Qualcomm’s chips.

This is a WCDMA license pact and Qualcomm granted Zoom a global royalty-bearing patent license to develop, manufacture and sell WCDMA and TD-SCDMA subscriber units.  The royalties payable by Zoom are at Qualcomm’s standard worldwide rates. 

Zoom Technologies sells into the Chinese market.  While that has been a source of gain in the past for companies, the trend so far in 2011 is that Chinese companies are less credible (or the credibility is at least more at-risk).  Shares were at $4.50 at the start of 2011 but were down to as low as $3.05 this week.

The move this morning is a 50% gain to $4.64 and the 52-week trading range is $3.05 to $7.50.  It is the recent trading and the near-China syndrome which may allow for more room above in Zoom.  The company recently reported that revenues had risen some 67% and it was back in January when Ladenburg Thalmann initiated coverage of Zoom with a “Buy” rating and gave it a target of $8.00 when shares were trading around $4.20.

As of September 22, 2009, ZOOM Technologies Inc. was acquired by Gold Lion Holding Limited in a reverse merger transaction.  Investors have been shooting first and asking questions later when it comes to reverse merger companies in China or which are outside of China but are China-dependent for revenues.

JON C. OGG