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Recent posts have criticised the QCOM board as filled with "hype" and cheerleading. Today, the hoary firm of Goldman Sachs seemed to be catching up with chief Q-defender Wildcat.

See below:

October 22, 1999 1:18 PM
Goldman: Qualcomm Is a Step Away
By Megan E. Lundin

GOLDMAN SACHS raised its Qualcomm (QCOM)
share-price target by $50 (that's right, $50), to $250
today, after the company said it would get rid of its
wireless-handset business. That will let Qualcomm focus
on its profitable code division multiple access (CDMA)
technology -- an industry standard for mobile
communications -- and create a new customer out of the
handset unit.

"Potential accretion from the sale of the handset business
(our conservative estimate is 10-15%), solid quarterly
results and a strong outlook for CDMA -- the fastest
growing wireless standard in history -- should be positive catalysts for the
stock," writes Goldman analyst Ajay Diwan in a note issued this morning.

Qualcomm stock closed yesterday at about $215, having already zipped past
Goldman's previous share-price target. It's not cheap at 54 times 1999
earnings, but there are plenty of reasons to buy it anyway, Goldman says.
Diwan explains in his note that Qualcomm should be valued as a fabulous
semiconductor company -- with potential to trade in the 50- to
70-times-earnings range. In mid-September Qualcomm announced that
fourth-quarter results were likely to meet or exceed estimates. The First
Call/Thomson Financial consensus calls for 87 cents a share. The report will
be out Nov. 2.

Why is the handset divestiture so important? Diwan explains that Qualcomm
currently doesn't recognize revenue or CDMA royalties from ASIC chips used
in its own phones. But a purchaser of Qualcomm's handset business would
instantly become a new ASIC customer that pays royalties on the value of the
phones it ships. The greater the ability the purchaser has to ship high volumes
of handsets, the greater the earnings potential will be for Qualcomm. The
company's goal is to announce a buyer before year's end.

Diwan points out that there's plenty of risk here. A delay could expose the
stock to volatility as investors become impatient and concerns resurface about
conditions in the handset business. There's also the risk that a would-be
purchaser can't sell enough additional phones to have a meaningful impact on
Qualcomm's earnings.

But Goldman is sanguine that the company can get a deal done and predicts
the impact would be a 10% to 15% addition to its current fiscal estimate of
$3.85 a share. The picture will be clearer when Qualcomm reports
fourth-quarter earnings and reveals for the first time detailed results from its
different business segments. Goldman predicts that when the business is
broken out, the ASIC business (45% operating margin) will be extremely
lucrative and the handset business (2.5% operating margin) barely profitable.

Sure is a nice Q day.
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