NEW YORK-Qualcomm Inc., San Diego, recently registered to sell a 4 million share secondary equity offering, which could increase its available capital by at least $550 million, based on its recent stock price.
Following Qualcomm’s registration with the Securities and Exchange Commission, Standard & Poor’s Corp., New York, said July 13 it might raise the company’s speculative grade ratings.
“Assuming the shares are sold at a price in the recent range … the corporate credit and bank loan ratings would be raised to BB+ (from BB) and the preferred stock rating to B+ (from B),” Bruce Hyman, a telecommunications equipment analyst for S&P, said.
Qualcomm had only $200 million worth of liquidity as of March 31, and that has been declining since. The pending stock sale and $600 million in revolving credit agreements will help Qualcomm fund “some of [its] $1 billion in potential financing commitments, its expanding working capital needs and (also) provide additional financial flexibility to support [its] evolving handset and other businesses,” Hyman said.
In the short term, Qualcomm faces more competition and lower prices for its handsets, which comprise nearly half its revenues. It also must contend with downward price pressures on the special-purpose computer chips it sells to most Code Division Multiple Access equipment manufacturers.
On the other hand, Qualcomm now is receiving patent royalties from “substantially all” CDMA manufacturers. In about three years, it can expect to gain similar royalties for next-generation Global System for Mobile communications technology, Hyman said.
