Qualcomm Will Buy Wireless Company for $1 Billion in Stock
Qualcomm Inc. said Wednesday it is buying a San Jose developer of wireless location-tracking technology for $1 billion in stock, but investors pummeled the company’s shares because of a tepid second-quarter shipment forecast.
The San Diego wireless phone giant saw its stock fall 16.3% Wednesday, or $24.38, to $124.63, in Nasdaq trading. More than 68 million shares changed hands, making Qualcomm the most active issue on U.S. markets.
Shares of Qualcomm, last year’s best-performing stock in the Standard & Poor’s 500, with a 2,600% gain, are now down nearly 31% from their late-December peak, shaving $36 billion from the company’s market value in four weeks.
Market watchers said Qualcomm’s sinking stock price is largely the result of profit-taking, and not a reflection of long-term trouble.
“I think there are a lot of institutions out there that are saying, ‘I’ve made a lot of money in this stock, and I don’t see anything in the next two quarters that will be a catalyst to propel the stock dramatically higher, so I’m going to take some profits,’ ” said Mark Roberts, a wireless communications analyst at First Union Securities.
One analyst who downgraded Qualcomm on Tuesday believes the company will meet or exceed its profit forecast this year.
Salomon Smith Barney analyst Alex Cena pared Qualcomm to “outperform” from an earlier “buy” recommendation because he believes the stock will rise 20% this year, instead of the 25% up-tick required of companies he lists as a “buy.”
At the same time, Cena raised his earnings target for fiscal 2000 to $1.06 per share, up from $1.04.
After the markets closed on Tuesday, Qualcomm reported that first-quarter profit more than tripled but warned that shipments of its phones and specialty chips may be lower in the second quarter than in the first. The company’s shares skidded 8% in after-hours trading on Tuesday.
Company executives attributed the expected drop in shipments to seasonal demand for phones and chips, as well as to reduced orders from phone makers who are working through shortages of other phone components not supplied by Qualcomm.
Despite the expected dip in deliveries, Qualcomm Chief Executive Irwin Jacobs said, demand for the company’s products remains strong worldwide and the company intends to meet or exceed earnings projections of 25 cents per share for the fiscal second quarter.
Jacobs, one of the company’s founders, was awarded a 17% salary increase to $773,000 and a bonus of $975,000 for guiding Qualcomm through a stellar fiscal 1999, according to the company’s annual proxy statement filed Tuesday. Jacobs, who owns 24.8 million shares, saw the value of his stake fall by $600 million on Wednesday, to $3.1 billion.
Before the markets opened Wednesday, Qualcomm said it will acquire privately held SnapTrack Inc. and plans to incorporate SnapTrack’s technology into its mobile communications products, including 911 service.
SnapTrack will become a wholly owned subsidiary of Qualcomm, and its employees will remain in San Jose, where the company has a product-development center.
