The Truth About Qualcomm's Quarter

The key to its revenue boost was a one-time patent settlement with Nokia.
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What's $560 million between friends? The Business Press Maven's guess is not much, at least if the buddies are Fortune, the business media outhouse -- uh, outlet -- and Qualcomm (QCOM) - Get Report, the wireless chipmaker.

You see, savvy investor, if you completely ignore a $560 million revenue boost from a one-time patent settlement with

Nokia

(NOK) - Get Report

, you'd think Qualcomm had a really nice fourth quarter, even though it raised more red flags than one can count for the current quarter.

Sure enough, there was

Fortune

, talking

right up top

about how Qualcomm had "turned in a strong fiscal fourth quarter Thursday." It sounded a bit peculiar, as the very next line spoke about how many tech biggies, including

Cisco

(CSCO) - Get Report

,

Intel

(INTC) - Get Report

and

Apple

(AAPL) - Get Report

, have lowered financial projections as business took a nosedive this fall.

But was business's dive so steep that a company can go from strong performance in the quarter just ended to pretty dire downward revisions in the current quarter's numbers?

Alas, nowhere in the

Fortune

article (and The Business Press Maven searched over, below and above) was there even a cursory mention of the $560 million, the more-than-chump change that gave a boost to Qualcomm's top line on the order of roughly 20%. Without it, Qualcomm's top-line performance in the fourth quarter fell well below expectations.

Suddenly, the slowdown doesn't seem so sudden.

Compare

Fortune's

failure to even mention the source of about a fifth of the company's revenue with this

pitch-perfect job

by

Barron's

. Right from the start, it got the issue into the headline: "Qualcomm Q4 Sales Beat, Or Do They? Nokia Settlement Props Up Top Line; Q1 and Year Forecast Well Below Expectations."

In case you skipped the bold headline about the propped-up top line, the lead spells out the same important reality: "Cell phone chip vendor Qualcomm this afternoon reported sales for its fiscal fourth quarter ending September 28th that were ahead of estimates thanks to a settlement of a patent dispute."

After alerting the savvy investor,

Barron's

rightfully spells out the dirty details a couple of paragraphs later: "Q4 sales of $3.33 billion and profit per share of 63 cents beat an average estimate of $2.86 billion and 60 cents. Bear in mind that that $3.33 billion includes a $560 million revenue item from a settlement of patent licensing dispute with Nokia, a boost that likely was not factored into many estimates. Without that settlement, the quarter's revenue was just $2.77 billion, which would be well below estimates."

You, the savvy investor, can develop your own meter for finding this sort of thing. If it seems too neat and tidy to be true -- well, it usually is.

The economy is certainly slowing, but it's obviously not slowing to such a degree -- no economy ever does -- that a company can be having a "strong" quarter and turn on a thin dime to dire cuts. Just as evolution takes millions of years, financial devolution takes more than a couple of weeks. Scratch the surface of such claims and you'll usually see one-time charges or credits behind that supposed scythe-sharp turn.

Beware. And be aware.

At the time of publication, Fuchs had no positions in any of the stocks mentioned in this column.

Marek Fuchs was a stockbroker for Shearson Lehman Brothers and a money manager before becoming a journalist who wrote The New York Times' "County Lines" column for six years. He also did back-up beat coverage of The New York Knicks for the paper's Sports section for two seasons and covered other professional and collegiate sports. He has contributed frequently to many of the Times' other sections, including National, Metro, Escapes, Style, Real Estate, Arts & Leisure, Travel, Money & Business, Circuits and the Op-Ed Page. For his "Business Press Maven? column on how business and finance are covered by the media, Fuchs was named best business journalist critic in the nation by the Talking Biz website at The University of North Carolina School of Journalism and Mass Communication. Fuchs is a frequent speaker on the business media, in venues ranging from National Public Radio to the annual conference of the Society of American Business Editors and Writers. Fuchs appreciates your feedback;

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to send him an email.