Roaming the G&K Jungle, I found this, a good summary of Q! from a couple of months ago, but still germane. A treasure which should not be buried. I don't think we'll need to wait quarters and years for recovery in stock price. Well, maybe a quarter or three, but things are going to happen faster in the WebWorld and that's wireless. It's an all-out race now. CDMA evolved in a reasonably sated cellphone market but entering the WWeb world will be dizzying. Already, the 3G spectrum auctions have shown how grossly undervalued Q! technology has been and how much higher royalties should be - every $$ into government coffers is a $ which should have gone to Q! and the USA inland revenue department for defence of Q!
Mqurice
To: Mike Buckley who wrote (23194)
From: tekboy Friday, Apr 21, 2000 1:44 AM ET
Reply # of 27351
<<I wonder if I could...convince you to be more specific about the concerns expressed in that article.>>
Sue might have some other specific concerns, but my hunch is that other newbies might be influenced by the general tone of this and other recent pieces, so some handholding and reassurance is definitely in order.
There is now no doubt in my mind that we have entered what might be called the Second Holy Wars. To recap for those who weren't around in the beginning (like me), there were several years in the mid-1990s when Qualcomm was pushing CDMA technology against a world of enemies and detractors (particularly the GSM cabal). It couldn't work, they said, it wouldn't work, and then--most galling--even if it does work it's actually ours not yours.
Well, just over a year ago (see post 833 above) these Holy Wars ended with an unconditional surrender from the forces of darkness (well, at least from one of the princes of darkness). The Qualcomm-Ericsson deal accomplished three things simultaneously: it confirmed that CDMA would indeed be a key part of the wireless future, it confirmed that Qualcomm would indeed get CDMA royalty revenues, and it started Qualcomm's move to a leaner and meaner business model by shedding the infrastructure division. The first two of these three turned out precisely as the Qualcomm management and the knowledgeable Qualcomm bulls had said they would; this gave them a whole lot of credibility while making the Q detractors look like evil FUDsters.
Well, the rest of the story is pretty familiar. Over the course of 1999 the meaning of the deal began to sink in (bouyed by the incredible numbers Q kept putting up), and by the fall everybody and his aunt had learned a simple (too simple) catechism: 3G=CDMA=QCOM. The stock price shot up accordingly, reaching obscene levels and making everybody very happy. Then came the giant tech updraft of late fall and winter that pushed everything up even further, with Q becoming the darling of the momos and the posterboy for Naz excess. The culmination of this, of course, was the infamous final week of December, with the split, the sale of the handset division, and the headline-grabbing price target by the ANALyst at PW.
Qualcomm was now a household word across the country (remember the CNBC "QUALCOMM...QUALCOMM...QUALCOMM" voice-of-god intonation?), and naturally the stock got far ahead of itself. We may have loved it purely and chastely for its pongid virtues, but lots of others were just using it for quick and easy gratification. The problem is, that kind loves 'em and then leaves 'em, which is precisely what happened after Dr. J made an infelicitously phrased comment about some future seasonal weakness of chip sales during a conference call. The Q promptly tanked, giving back nearly half of its price and proving that trees don't, after all, grow to the sky--at least not in several months.
Since then the stock price has fluctuated in something of a trading range (dreaded phrase) between a quarter to a half off its all-time high as people waited to see what the future would actually bring. While down from the peak, this range was still extremely pricey given any traditional method of valuation, and so only true Q bulls thought the stock should and would naturally go back up.
Which brings us to the present. This quarter's results were better than the bears had expected, and Dr. J could hardly have been more optimistic about the company's future prospects during the CC. So--why hasn't the stock jumped back up, and will it ever do so? The answer to the first question is that right now Mr. Market is from Missouri when it comes to techs, and future just-so stories no longer count for quite as much as they once did. Moreover, by traditional valuation methods Q is still horribly overpriced, so it could go down quite far even from here if such methods prevail. The answer to the second question is far more important, however, and will ultimately depend not on short-term market sentiment or momentum but on whether Q can deliver the extravagant goods its loyalists have come to expect.
The reason I say we are in the Second Holy Wars is that in recent months this rosy future has once again come under explicit attack. Before the Ericsson deal, the anti-Q refrain was simple: "CDMA won't work, and even if by some chance it does, Qualcomm won't reap monopoly profits from it." Since this can no longer be said with a straight face, the new anti-Q refrain (simplified, natch) is as follows: "Sure, Qualcomm is a fine company; it helped pioneer some of this CDMA stuff and will continue to make a lot of money from that over time. But it will be only one of several companies profiting from CDMA, CDMA will be only one of several wireless standards out there, and competitors will soon give it a run for its money. So its current valuation is extravagant and future surprises will only be to the downside."
Who is saying such things? Well, many of the same people and organizations who said CDMA would never work--and who stand to lose out if Qualcomm actually makes good on its promises. Who says the opposite? Well, many of the same people (including Q management) who were bullish the first time around. The only thing we can know for certain right now is that if the bears are correct Qualcomm is overvalued, while if the bulls are correct it might be undervalued. (What did you expect--markets clear at the compromise level, right?)
The upshot of all this is that if you're a Qualcomm holder or thinking of becoming one, you should keep two things in mind. First, the true story will play itself out not in the next few weeks or months, but in the next few quarters and years--so you should be prepared to be a long long. Second, you need to learn enough about the company and its sector to make an educated decision of your own about whether to side with the bulls or bears. The starting point for such learning should be the old posts of Gregg Powers here on SI (you can find them by searching "PeopleMarks"), followed by browsing among the wizards over on the "New Q" thread, who carry on the most knowledgeable and informed running discussion of QCOM available anywhere. For a Gorilla Game perspective (which of course is the best one), you should browse through the March-August 1999 posts on this thread, paying particular attention to people like Merlin (Mike Buckley) and other members of the Roundtable.
If after all that you can't dismiss the constant barrage of FUD coming from competitors, biased analysts, media morons, and others, then you should not be in the stock. No harm done, no feelings hurt, there are lots of other investment opportunities out there and you should avail yourself of them. 'course, if at the end of the day ya wanna join the cult instead, that too can be arranged...
tekboy/Ares@QUALCOMM...QUALCOMM...QUALCOMM...QUALCOMM.com |
