Brian, I agree with all you wrote in the post this is a response to. I guess if we relate early QCOM to present IDC, it could be considered on-topic. But let's try to keep the focus of discussion on IDC.
You asked why I originally invested in QCOM at a time when it was not a certain Gorilla and relate that to IDC's bet on 3G which you mention is two years away. I would point out that, recently, wireless analysts have been making the case that 3G is looking more like 2003-2005 which is more like 3-5 years away. I'm not a fan of many of these analysts and I think wireless could move faster than they think. We'll have to wait and see how it unfolds, I hope sooner rather than later!
Back to your question. I originally invested in Q in spring of '97 which, in hindsight, turned out to be way too early. But the initial attraction was the inherent "beauty" of CDMA as a wireless technology. I won't go into the details of that. Next, I was impressed with the early success Jacobs had with Linkabit, the satellite company Jacobs had played a prominent roll in founding and directing. Also, the commercial roll-out of CDMA in Hong-Kong, Korea and followed by L.A. and other American carriers was encouraging. The technology was actually being commercially deployed. There were some technical glitches that worried me a bit but as I learned more about the technology the problems appeared minor, the types of things one would expect with a new and relatively untested technology. Things were going well but the stock price was going down! So I researched the CDMA "building block" patents some more and talked with people in the industry. Adding to the confidence I had in my research were posts by Gregg Powers, who did research for an investment fund for private retirement accounts (I believe). His firm was the largest institutional holder of Qualcomm shares and had paid a well-respected IPR firm a lot of money to analyze the value or Q's IPR. Gregg claimed the report was very favorable. All of the positive info about the Q was making a lot of sense and, while there were QCOM detractors, all of them appeared to have a financial stake in CDMA not becoming a bonafide standard and the things they were saying didn't pass the "rationality test". These events, along with further research allowed me to add to my Q holdings without undue concern. As an added bonus, the price of Q was becoming very reasonable. I considered it a real value play and was even recommending it to family and friends who had low risk tolerance. All the pieces of the puzzle fit.
My concern with IDC is three-fold.
1) Time to commercialization. A win in the Ericy case could provide some interim revenues but there are many possible reasons why this is may not materialize.
2) The strength of IDC's patent portfolio. I have not seen (or even heard of) an independent professional assessment of their IPR. Yes, I have heard about the hundreds of "CDMA patents" (I have read all of their U.S. patents but am not a patent attorney specializing in wireless IPR, these guys charge hundreds of dollars an hour and a realistic assessment would take hundreds if not thousands of hours to complete). Intuition tells me there is some value there but how much? How much is company hype and how much is true value?
3) This concern is related to my second concern. How much IDC IPR will really be needed to implement 3G. Sure the company claims IPR in all 5 standards but the standards are not complete, most companies have not signed licenses and standards change.
Please don't take this as an IDC "slam". I am just calling it as I see it. I am interested to hear why I shouldn't worry about these things but so far IDC as a company has not inspired the same confidence that QCOM inspired even before it attained gorilla status. Other sincere opinions are more than welcome.
Sincerely, Bux |
