Qualcomm has taken a battering and will take more Wednesday after the company merely beat estimates by a penny and handed out a few forward-looking statements. First let's get something straight -- there is nothing fundamentally wrong with Qualcomm despite a big aftermarket dip. In fact, it's the wireless Microsoft. Did Qualcomm deserve its 1,400 percent run-up in 1999? Probably not, but it deserved a lot of it. Of course, super stocks can't rise forever so now Qualcomm shares are getting squeezed. We should also consider a few points about the market. No fool would have cashed out on Qualcomm in December because of the tax hit. Ever since the calendar turned, there has been a whole lot of selling going on in January. If you bought at the high (and I did in my Investment Challenge portfolio), you get what you deserve. And now for those earnings results. The market giveth and the market taketh away. Qualcomm -- the company that could do no wrong in 1999 -- reported first quarter earnings of 25 cents a share on revenue of $1.1bn (£0.68bn). The results topped First Call consensus by a penny, but missed the so-called "whisper number" of 27 to 28 cents. Companies that live and die by momentum can't miss whisper estimates. Qualcomm had good news to report overall, but it wasn't as good as last year's 4-for-1 stock split or overly optimistic price targets. Qualcomm's decline is natural so don't fret. Qualcomm said it will take a charge in the second quarter related to the sale of its handset business, but the hit will be offset by investment gains. You could worry about Qualcomm's outlook for the second quarter, but you'd be wasting your time. Qualcomm said wireless chip sales would be down a bit in the first quarter because of "seasonal factors, inventory balancing by customers due to continued shortages of other phone components, and transition from older chips (MSM2300) to the latest chips (MSM3000 and MSM3100)." In addition, handset sales will be lower in the first quarter because of the seasonal shift. No catastrophes here though, Qualcomm said it will meet or exceed estimates of 25 cents a share in the quarter. Qualcomm is focusing purely on licensing its CDMA mobile telephone technology and will see higher profit margins once it ditches its handset business. "Qualcomm expects that the market for CDMA products and demand for its CDMA chipset and software solutions will continue to grow significantly in the future despite quarterly fluctuations," said Qualcomm. "The company remains comfortable with the current analyst consensus earnings estimate for fiscal 2000." There's a good reason to be comfortable. Licence, development and royalty fees from Qualcomm's third-party licencees were $144m in the fourth quarter, up 224 percent from a year ago. And that's just the beginning. Highlights and lowlights It was very difficult to keep track of last night's barrage of earnings. We get paid to track earnings and had a lot of trouble. Here are some items worth noting: Commerce One fell short of analyst estimates by a penny, but sales soared. We caught the tail end of the conference call and analysts were saying "nice quarter guys" so that penny may not be that meaningful. In our book, however, a miss is still a miss, especially when it comes to those overvalued stocks. Compaq reported fourth quarter earnings of 19 cents a share, beating estimates by 3 cents. The conference call, however, was uninspiring and investment gains padded results. Hold out for Friday though. That's when Compaq holds its analyst meeting. eBay's profit doubled estimates. There are some worries, but investors should be cheering -- eBay hasn't had any big outages lately. RealNetworks seems to be getting used to profits. The company reported another profit and topped estimates by 2 cents a share. The company also issued a 2-for-1 stock split. Vignette is quickly becoming one of the premier Net companies. The company reported a smaller-than-expected operating loss of 5 cents a share, but the real story is sales. Fourth quarter sales were $40.9m, up 512 percent from a year ago.
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