Research Report Puts Qualcomm on the Defensive
Qualcomm Inc. on Friday defended its accounting practices after a research firm’s report raising concerns about them sent the company’s shares down to a 21/2-year low.
“Qualcomm has the highest standards of corporate governance and accounting,” said Anthony Thornley, chief financial officer of Qualcomm.
“What obviously has happened here is that [the research firm] has extracted data [that has been] taken out of context and not presented in context,” Thornley said.
Questions about corporate accounting methods have dogged the stock market in the wake of energy trader Enron Corp.’s collapse.
A summary of the Center for Financial Research and Analysis report obtained Friday by Reuters said, “We found that the company has recorded revenue in exchange for noncash consideration and that the company has accepted noncash consideration for receivables removed from Qualcomm’s balance sheet.”
The Rockville, Md.-based center analyzes public companies’ financial data for money managers and other clients. Efforts to reach the report’s author were unsuccessful.
After dissemination of the report, Qualcomm’s stock hit a low of $34.59 before recovering some of its losses and closing at $37.46, off $1.65, or 4.2%, on Nasdaq.
“In this environment, any time someone raises accounting concerns of a company, the stock is going to suffer,” said Matthew Hoffman, wireless analyst with SoundView Technology.
Qualcomm issued a statement addressing the report after the stock market closed.
CFRA said Qualcomm allowed early-stage companies to pay part of their license fees in equity instead of cash. CFRA said Qualcomm recorded $11 million in revenue during fiscal 2001 based on the equity and accepted $9 million more in equity as receivables. Total revenue in 2001 was $2.7 billion.
Thornley acknowledged the CFRA figures, but said the accounting was in accordance with accepted principles.
The report also cited what it called potential conflicts of interest between the board and the company’s auditor, familial relationships among Qualcomm’s executive officers and “seemingly generous option grants during a year of poor corporate results.” Thornley disputed those points.
