QUALCOMM Throws Cash At Falling Stock (QCOM)

This is nearly funny, or at least ironic.  I had been working on a piece to post at 5:00 PM addressing the steady chart meltdown happening at QUALCOMM Incorporated (NASDAQ: QCOM).  It seems as though that the stock market or the tech sector can go up or down, but now QUALCOMM shares just go down.  Then right after the close the company issued a press release in hopes of some redemption.  It is increasing its dividend and increasing a share buyback plan.  Shares are up on the news, but the company still has more redemption needed.

Its board of directors has approved a 12% increase in the quarterly cash dividend to $0.19 per quarter from $0.17 per quarter.  The board also announced that it has approved a new $3 billion common stock buyback program to replace a $2 billion stock repurchase program which was recently completed with $1.7 billion of repurchase activity.

The dividend will be effective for quarterly dividends payable after March 28.  The new $0.76 per year is an implied dividend yield of about 2.1%.

The company said that since 2003 it has returned $12.6 billion via dividends and buybacks.  It was nearing $20 billion in cash and investments on the latest report.  Shares closed down 3% at $35.56 today, yet shares are up 2% at $36.30 in the after-hours session.

What you were about to get to read was a story titled “How Bad Is QUALCOMM’s Chart Versus Business?” based on its slide.  The real problem is not the units being sold, but the average selling prices of each.  These have been sliding, ergo margin pressure.

Today marked the seventh consecutive losing day for the stock.  Shares were at $46.99 at the close the day the company reported its awful ASP guidance.  That is effectively a pullback of almost 25% in just over a month.  And shares were at $48.76 on the Jan. 7 day that Jim Cramer came out with his crazy tech tsunami piece about 10 tech stocks to win in the mobile internet growth.

The only good news is QUALCOMM’s valuation here.  It trades now at about 16-times 2010 earnings and about 14.4-times 2011 earnings.For whatever it is worth, the 52-week low is $32.64.  Had the company not tried this, and perhaps whatever other tricks it can think of, this stock was on the way to testing those 52-week lows.

Jon C. Ogg