Omega Advisors exits position in Qualcomm
Key positions traded by Leon Cooperman's Omega Advisors in 3Q14 (Part 5 of 12)
Omega Advisors and Qualcomm
Omega Advisors exited a position in Qualcomm (QCOM) during the third quarter. The position accounted for 1.33% of the fund’s portfolio for the second quarter that ended in June.
Overview of Qualcomm
Qualcomm is a leading developer and innovator of advanced wireless technology products and services. Qualcomm Incorporated includes Qualcomm’s licensing business, QTL. It also includes the vast majority of its patent portfolio.
The company designs, manufactures, and markets digital communication products and services. The products and services are based on code division multiple access, or CDMA, orthogonal frequency-division multiple access, or OFDMA, and other technologies.
Qualcomm’s products mainly consist of integrated circuits—also known as chips or chipsets. The products also consist of system software used in mobile devices and wireless networks.
The company has three reportable segments. It conducts business primarily through two segments, QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm Technology Licensing). The third segment, QSI (Qualcomm Strategic Initiatives), makes strategic investments.
Qualcom invests in Qterics as part of Internet of Everything initiative
Qualcomm recently made a $7 million strategic investment in Silicon Images’ new subsidiary, Qterics, for a 7% stake. Qterics will be focused on enabling a wide variety of solutions and services for Internet-enabled consumer products including TVs, mobile handsets, tablets, routers, home automation devices, white goods, and more. Qualcomm said it is “ committed to enabling technologies that support the Internet of Everything initiatives.”
Fourth-quarter results miss estimates
Last month, Qualcomm announced 4Q14 and fiscal 2014 earnings that missed estimates. Its revenue for 4Q14 was $6.69 billion, missing analysts’ expectations by $330 million. The company’s non-GAAP EPS (non-generally accepted accounting principles earnings per share) of $1.26 missed analysts’ estimates by $0.05. Qualcomm’s stock declined by about 10% on the results and weak outlook.
During fiscal year 2014, 50%, 23%, and 11% of Qualcomm’s respective revenues were from customers and licensees based in China, South Korea, and Taiwan. Its main customers include Samsung Electronics, Hon Hai Precision Industry Company, or Foxconn, its affiliates, and other Apple suppliers.
Qualcomm facing challenges in China
A previously published story revealed that while China is an important market for Qualcomm, its QTL business in the country is suffering. The company is facing a licensing dispute, under-reporting of device sales by some Chinese vendors, and refusal by some Chinese vendors to sign licensing agreement with Qualcomm. It said, “China continues to present significant opportunities for us, particularly with the rollout of 3G/4G LTE multimode, but also presents significant challenges, as our business practices continue to be the subject of an investigation by the China National Development and Reform Commission (NDRC).”
For more on Qualcomm’s 4Q results and outlook, read Why did investors punish Qualcomm’s stock after its earnings?
Omega’s 3Q14 positions
The fund added new positions in AerCap Holdings N.V. (AER), Nordic American Offshore (NAO), and Melco Crown Entertainment (MPEL). It exited its positions in Qualcomm (QCOM), Ocwen Financial Corp. (OCN), Freeport-McMoRan (FCX), and Boston Scientific Corp. (BSX). Notable position increases during the third quarter were QEP Resources (QEP) and United Continental Holdings (UAL).
The next part of the series will cover Omega’s exit from a position in Ocwen Financial Corp.
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