Savvy Confidential: A Briefing for Investors : Qualcomm Shares Fall 12% on Profit Outlook

Shares of Qualcomm Inc., the best-performing stock in the Standard & Poor’s 500 index this year, tumbled 12% Wednesday on fears that profit for the latest quarter won’t top forecasts by as much as in past quarters.

The San Diego cell-phone and chip maker’s shares fell $23.50 to close at $168.69 on Nasdaq, wiping out $3.8 billion in market value in the biggest drop since April 19.

Everen Securities Inc. analyst Mark Roberts, who met with management Tuesday, said falling cell-phone prices and a parts shortage may prevent Qualcomm from repeating its performance of the last three quarters, when it topped per-share forecasts by an average of 28%.

“Although the company has substantially beat estimates the last couple quarters, we doubt the company has the ability to exceed [fiscal] fourth-quarter expectations to that same extent,” he wrote.

Roberts expects earnings of 88 cents a share for the quarter that ends this month. Analysts polled by First Call Corp. expect 87 cents. But in the previous quarter, profit came in at 75 cents a share, handily beating the 63-cent estimate.

Qualcomm, whose shares have risen more than sixfold this year, has hoped to benefit from the potential for its technology in China. Roberts, however, wrote that in his meeting with company management, Chief Executive Irwin Jacobs “was more cautious than we would have expected” regarding the roll-out of code-division multiple access, or CDMA, the fast-growing standard developed by Qualcomm.

Competition from Nokia and Motorola Inc. also is adding pressure, said analyst Ed Snyder of Hambrecht & Quist.

As Qualcomm shares soared to records in the last month, management has been selling shares. Since July 28, executives, directors and other insiders have moved to sell about 1.4 million shares, according to the Washington Service, which tracks insider activity.

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Static on the Line

Qualcomm’s surging shares took a big hit Wednesday after an analyst forecast slowing growth in the fourth quarter, but the stock is still up more than sixfold on the year. Daily closes since April 1 and latest on Nasdaq:

Wednesday: $168.69, down $23.50

Source: Bridge Information Systems