Markets
TXN

Why QUALCOMM Inc. Fell 18% in November

QCOM Chart

QCOM data by YCharts .

What: Shares of QUALCOMM fell 17.9% in November, according to data from S&P Capital IQ . Two quick hits erased all the gains from a profitable October , with plenty of vitriol left over.

IMAGE SOURCE: AUTHOR, USING QUALCOMM FOR THE LOGO AND A PUBLIC-DOMAIN KOREAN FLAG.

So what: First, the giant chip designer reported solid fourth-quarter results with a side of downright terrible forward guidance. Moreover, management is losing forward visibility to the point that they will now stop providing full-year guidance figures in these quarterly updates. Shares fell more than 15% the next day , setting the tone for a brutal November.

Two weeks later, Qualcomm disclosed a new anticompetition investigation against the company by regulators in South Korea. This case could drag on for years, like the last Korean complaint did. That time, Qualcomm ended up paying a hefty $236 million fine for encouraging Korean device makers to use the former's own chips rather than licensed alternatives based on Qualcomm's technology patents. Qualcomm shares took another 10% dive on this news.

Now what: All told, Qualcomm investors have seen their shares falling nearly 35% in 2015. And it's not an industry thing, but Qualcomm's own pain.

Archrival Texas Instruments has gained 6% over the same period. Slightly smaller but even more direct blow-for-blow competitor Broadcom has surged 33% higher.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

It's all about execution. Broadcom and TI have held their cash flows relatively steady over the past year. Meanwhile, Qualcomm's free cash flows shrank by 38%. Revenue figures play out a similar story.

That Korean regulatory threat may cost Qualcomm some serious cash, albeit several years down the line.

But before worrying about that distant threat, Qualcomm's leadership and investors must focus on getting back to profitable growth. Losing big-ticket contracts and getting distracted by anticompetitive investigations is not a great way to get there.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Why QUALCOMM Inc. Fell 18% in November originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Qualcomm. Try any of our Foolish newsletter services free for 30 days .We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

TXN QCOM

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More