QCOM's Management: In a word I think they have been BRILLIANT thus far. They started out as the undisputed underdog. They built their base of support and guaranteed future growth by drawing strategic players into their plan, giving up some of the profits longer term, but getting an industry wide base of support in return, along with a fairly reliable royalty stream.
Their joint venture with Sony to form QPE is one example. They gave some of the handset profits to SONY but got Sony's expertise in the personal electronics market in exchange.
In North America they (wisely) chose to manufacture infastructure equipment with strategic partners (Nortel - Hughes) only. Their reasoning was that NA Telcoms had long term business relationships with existing equipment companies and it would be wiser to tie in with them rather than fight an uphill battle. Overseas, QCOM plans to go it alone in some cases.
I think they try to "manage" the stock price very well, timing positive news releases when a boost is needed.
I think the managers of QCOM know very much what they are doing.
But I really don't know if QCOM is headed to $40 or lower short term. Maybe it will. Management cannot do anything about that in this market.
But if you want to buy a part of a profitable company in the early stages of what could be tremendous growth, then QCOM is a good candidate. This does not mean there are no risks long term. There are a bunch of risks and the entire plan could still fall into pieces. But, as time goes on, that scenario seems less and less likely.
QCOM is still a 'show me' stock, no arguement. They are balancing on a tightrope of managing growth and paying for their expansion and R&D on the one hand, while trying to meet Wall Street's short term expectations on the other.
If there were no risks and the road to $10 per share profits was a sure thing, then QCOM would be $300 per share.
There are no such quarantees so we will just have to wait and see!
HOWEVER:Three of the best questions to ask, in my opinion, to guage the future potential of a company are:
1. How big is the potential market for what they offer. You know the answer to this one, right?
It's about 80% of the world's population, and the next wave of telecom buildout worldwide is estimated to be in the trillions, with a T.
2. How big a market share can the company reasonably expect in this marketplace? This is a little tougher, but with their existing patents, R&D, and strategic royalty-bearing relationships, I think it is safe to assume that their share will be big enough. Even a relatively small share would be exceptional for a small company like QCOM.
3. Does the company have what it will take (management) to see the company realize it's potential? Always tough to say for sure on this one but QCOM has made a point of hiring the best and the smartest. I think they have what it takes.
Finally, on this Q phone thing: I think MOT's strategy here has been entirely to slow down QCOM's entry into the marketplace with this phone. MOT has been slow to market with CDMA handsets.
I do think the story poises a threat to QCOM's stock price in this jittery market, probably more than the lawsuit poises a threat to QCOM's profits. |
