Qualcomm Swings to Loss on Settlement; Raises Guidance
Telecom company Qualcomm ( QCOM), shares spiked Monday morning, after the company reported first-quarter earnings that included a big legal settlement with its arch rival Broadcom ( BRCM). Qualcomm said that after a more than four-year legal battle over patent infringement issues with Broadcom, the two sides finally reached an agreement late Sunday night that requires Qualcomm to pay $891 million over the next four years. Because of this settlement, Qualcomm posted a fiscal first-quarter net loss of $289 million, or 18 cents per share, compared with a profit of $766 million, or 47 cents per share, in the year-ago quarter. Excluding special items, the company would have seen profits of 3 cents per share. On average, Wall Street analysts expected profit of 40 cents per share. Revenue fell to $2.46 billion from $2.6 billion last year, but still beat analyst estimates for $2.35 billion. The company said that global demand for new wireless phones remained strong, citing China as a high-growth area. Qualcomm raised its 2009 full-year revenue estimates to a range of $9.85 billion to $10.25 billion, up from an earlier range of $9.3 billion to $9.8 billion. Qualcomm shares rose $2.36, or +5.6%, in late morning trading Monday. We removed shares of QCOM from our "Recommended" list back on Sept. 25, when the stock traded at $46.54. The company will know have a dividend yield of 1.64%, based on Friday's closing stock price of $32.79. The stock has technical support in the $33-$37 price area. If the shares can firm up, we see overhead resistance around the $45-$48 price levels. We just put the stock on our "upgrade" watchlist and will keep subscribers posted as to any further ratings changes.