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Qualcomm Madness

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Who could have predicted that a hometown, high-tech stock would go from $25 a share to more than $650 in one year, the biggest winner on the Nasdaq Exchange? And that a four-to-one split would put so many shares in the hands of San Diegans? Qualcomm, a leader in the wireless industry, controls CDMA (code division multiple access), which is to wireless what Microsoft’s Windows is to personal computers.

Stock in Qualcomm had been advancing steadily all during 1999. Fourteen million shares of Qualcomm traded hands on December 30, almost three times the usual volume, with the stock at $659. But on January 3, a pivotal event occurred that sent it over the top. Michael Piecyk, a 28-year-old, baby-faced analyst at Paine Webber in New York, announced that the stock would go to $1,000 by the end of the year 2000.

Volume suddenly topped 45 million, making Qualcomm by far the most active stock on any U.S. exchange. “People are going to go crazy when somebody dangles a $1,000 price target,” says a First Albany analyst in New York. “They say, ‘I’ve got to get in on this act.’”

For a few moments on January 3, the split shares were worth a littleover $200 each—putting the value at $800, already close to Piecyk’s target price. There was, however, a wild movement to sell at the top, and Qualcomm has drifted down from its height. As we go to press, shares are below $150—but still a healthy figure.

Some brokerages accommodated clients who wanted to sell even before the split shares hit their accounts. A January 3 note on an Internet message board read: “I just called a trader at my brokerage firm, asked to sell my shares of Q. It took him two minutes to verify that split shares were due in the account. He said he has been doing this all day with QCOM. Not a good sign for the longs [long-term investors]. Could be really ugly tomorrow as Q holders get home from work and see the drop.”

Actually, the drop has been gradual. But there’s no doubt speedy investors claimed profits that have not been seen since—and may take another few months to be realized again.

Still, it seemed that for a couple of days, everybody in town was involved with Qualcomm. Either they once owned it and sold it, or heard about it and meant to buy it, or a friend made a killing and they were envious. In elevators, in movie waiting lines, in restaurants, the talk was of Qualcomm. One woman whose husband was an early Qualcomm employee figured that if they’d exercised their options when he left the company (they didn’t), they’d have made $17 million.

Bob Watkins, head of Watkins Executive Search, moved in and out of Qualcomm at exactly the wrong moments. “I personally owned the stock for 18 months. I bought it at 49, held it for about a year and sold it at 40. What a dumb move I made. My wife, in a self-directed retirement program, considered it at 360. But she said, ‘I’ll wait till it splits; then it’ll be cheaper.’ That’s a dumb-blonde joke,” says Watkins. (When a stock splits, each share costs less but is valued at less.)

Radio’s Joe Bauer laughs at his own experiences. “I bought Qualcomm at 30,” he says. “When it went up to 60, I said to my broker, ‘I’ve never had a stock that doubled in a year.’ So I sold it. If I’d kept it, I would have close to half a million dollars today. Then a few weeks ago I bought it again. At 160. That’s just before it dropped to 110.”

And Bauer laughs over his experience with another local stock—e-digital, bought and sold at the wrong times. “Do what I didn’t,” says Bauer. “Call me up and say, ‘Joe, what did you buy today?’ If I bought it, you sell it.”

“What did I learn?” says another investor, who prefers anonymity. “Never listen to your broker. I got interested during our stadium-naming, when Qualcomm gave $18 million to improve the stadium. I phoned my broker and suggested Qualcomm, but he said, ‘No, we don’t follow that stock.’ A few months later he said, ‘Well, okay, maybe’—so I bought 100 shares at 40. When it went down to 25, the broker called and said, ‘Sell before it goes to 10.’ So I sold, thinking myself very prudent. Sure enough, it stayed low for a while, and I felt pretty good about it. When it started up, my 100 shares would have split to 200, then 800 shares. I would have made $120,000 on a $4,000 purchase.”

Actually, if she’d sold at the peak, she would have made $160,300.

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