LONDON -- The connection between


(QCOM) - Get Report

and its shareholders has been anything but clear over the past few weeks, as concerns about the company's future growth have driven the price 66% from its January high.

The static comes in the form of uncertainties about China, where Qualcomm was expected to begin selling its technology after that country joins the

World Trade Organization

, and Korea, where a ban on hand-set subsidies could crimp growth.

Yet, it's not at all certain how severe Qualcomm's setbacks in these regions will turn out to be, or what impact they will have on the company's earnings. On Monday, the shares traded down 5 1/4 to 67 7/16.

No one from Qualcomm was immediately available for comment.

Given the mounting confusion, it's useful to lay out the risks facing Qualcomm in China and Korea, while balancing them against the strengths the San Diego-based company is experiencing in the Americas.

Worst Case

There's little doubt that Qualcomm had expected to begin selling Chinese carriers its CDMA (code division multiple access) digital technology, which transmits voice and data over existing second-generation mobile-phone networks.

Yet instead of an open-door policy, Qualcomm is finding China as closed as ever.

China United Telecommunications

, or Unicom, the country's second-largest phone company, is opting to boost its investment in its existing network rather than adopt Qualcomm's technology. (Unicom will be raising funds in an IPO expected in about

two weeks.)

That decision could delay Qualcomm's opportunity to penetrate China for two or three years, until operators upgrade to third-generation technology, in which Qualcomm's version is widely expected to become the standard. (See related


A worst-case scenario, in which Qualcomm is unable to immediately secure any business in China, would result in a 10 cent-per-share hit to earnings for the year ending September 2001, according to estimates by

Bear Sterns

analyst Wojtek Uzdelewicz. Of the 150 million CDMA subscribers worldwide by 2001, Uzdelewicz expects 8 million to come from China. Qualcomm gets a royalty on every CDMA phone sold, and by 2001, Uzdelewicz estimates the total revenue from such royalties will be about $62 million. Bear Sterns has performed underwriting for Qualcomm.

Qualcomm also has a chip-set business, of which Uzdelewicz expects 4 million will be sold in China at $19 a pop. With a 36% operating margin, that works out to $27 million.

Then there's Korea, which accounts for 40% of the worldwide CDMA market and, more importantly, a solid chunk of Qualcomm's earnings. Korea's

Ministry of Information and Communication

recently banned carriers from subsidizing hand sets to attract new customers.

Qualcomm's growth in this market was expected to slow because of the country's high, 58% penetration for mobile phones. Yet, a ban on subsidies would certainly hasten that decline. The MIC estimates such a subsidy ban could cut demand to 8 million hand sets, compared with 15 million if subsidies were allowed.

At first glance, these developments sound grim, yet they are far from clear-cut. And that could leave the door open for Qualcomm to work some fast negotiations.

For instance, despite a report in Monday's

Wall Street Journal

that "confirmed" Unicom's decision to postpone its adoption of Qualcomm's technology for at least three years, at least one analyst remains unconvinced that Qualcomm is truly locked out.

"It's difficult to say what is a confirmation and what isn't," says Walter Piecyk, a

Paine Webber

analyst, who only last week told


viewers that Qualcomm had China in the bag. He rates the shares a buy, and his firm doesn't have a banking relationship with Qualcomm.)

The outcome is similarly uncertain in Korea, where the government has twice before tried to eliminate subsidies with limited results. "Demand slowed for a while, but then picked up again," Uzdelewicz says, adding that for this reason it's "hard to quantify" the impact on Qualcomm's earnings.

Finally, setbacks in China and Korea must be weighed against Qualcomm's prospects in other regions, most notably the U.S. and Latin America, where stronger-than-expected demand could offset Asian woes.

Upping Estimates

"The commentary has assumed the rest of the world remains static," Piecyk notes. In reality, he points out that certain U.S. carriers like

Sprint PCS


have been guiding analysts to raise new-subscriber estimates -- a fact that will bode well for Qualcomm, which licenses its technology to Sprint.



(TEF) - Get Report

, the Spanish mobile-phone company, has been aggressively expanding in Brazil.

What this means for Qualcomm is that -- barring any new developments -- the stock is likely to linger at its current level until investors have a chance to sift through earnings for the June quarter and decide whether faster growth in the Americas is enough to offset disappointments in Asia.

"Qualcomm is a momentum name," Uzdelewicz, the Bear Sterns analyst, says. "When you have a possibility of earnings revisions, you can have a stock that doesn't do much until everyone adjusts their numbers."

So far, most analysts, including Uzdelewicz, have left their estimates intact until more information becomes available. Until they do, Qualcomm's connection with Wall Street is unlikely to improve.