The debt burden issues actually work in our favor, and powerfully undercut the GSM cartel's ability to isolate and restrict the deployment of cdma. As a result of the debt burden, a premium is placed on operational efficiency. Existing cdma carriers enjoy profound advantages in this area, with respect to cdma's greater spectral efficiency, the seamless upgrade to 3g, the advantage of not having to purchase new spectrum to deploy cdma2000, and the ability to use cdma2000 to increase voice capacity (and thus steal market share) in the unlikely event that there is a slower than expected uptake of data usage by the consumer.These advantages, the importance of which have only been exacerbated by the financial condition of the industry (for example, do you think the Euro operators would even be having the "preliminary" discussions with QCOM about cdma2000, to which IJ recently referred, if they were all awash with cash and not facing their financial pressures)all are the result of the "geeky" technological differences between cdma and everything else.
Spytrdr brought to our attention yesterday the disturbing QCOM chart showing the "descending triangle" pattern, and also attached a very informative link explaining the accompanying technical analysis. I thought it was very interesting, and unsettling. And it may well presage a a significant drop from these levels. The message of the last month is that the barrage of good news on QCOM hasn't been enough to keep deteriorating market fundamentals from knocking the stock from a trading range in the 80s to its present levels.I therefore agree that, for those with a 6-9 month horizon, QCOM is a risky stock.
I think the question each of us needs to ask ourselves is why we own the stock.If we are trying to "time the market", close to retirement, in need of the cash for any other reason over the next 6-9 months, are daytraders,like to play the stock through options strategies, then this is not the place for you.
OTOH, if your objective is to own the stock at the point of 3g fruition, the message of the chart over the last two years is that this is a very difficult stock to trade in and out of. If you had been prescient enough to cash out at the top with a view towards a re-entry point, you would've been sorely tempted by last summers suckers rally from 106 to the 150s. If you had been smart enough to sell at the top of the summer rally, you would've been sorely tempted by the rally to 110 in late November.To paraphrase Sting (the wrestler, not the insufferable bore)the only thing that's certain about QCOM in the short run is that nothing's for certain.
We may well be bloodied for a time by the descending triangle.But I think of all the things that could happen in the near future that, when added to all of the positive developments since the 3gsm conference, could fundamentally break this long term downtrend.
Let's see.
China could actually let a contract, a major Latin America TDMA carrier could announce its switch to cdma 2000,QCOM could reaffirm guidance at the next cc, a Euro carrier might break ranks and commence more than preliminary discussions with QCOM, Nokia could finally sign the 3g licensing agreement, cdma 2000 could explode in S. Korea after the expiration of the gov't consent decree in June. It is also difficult to imagine that China and India, and the emerging cdma 2000 deployments won't provide either upside or forward visibility in 2H01.
So if you want out, thats a respectable decision. But if you are getting out with the prospect of getting back in later (and you still have a sizeable gain) , I think you'd be better off staying put. To do otherwise means that the stock would not only actually have to trade down enough to more than offset your tax liability,but that you pull the trigger at the right time to get back in. It means that you not panic and buy back in if,say, the stock jumps to the low 60s next week on its way down to 35.It means you have ratcheted up by several orders of magnitude the good luck you must have,and the right decisions you must make, as a QCOM investor.
As I know my limitations, I will instead hold onto to my shares. In so doing I have only had to answer two questions.
At Friday's close did the price fully value the growth QCOM will experience over the next 5 years? No.
By 2006, will the share price offer an attractive annualized rate of return from these levels? Yes.
A final disclosure. Yes, knowing what I know now, I wish I had sold for $200/share. But that is no longer the question before us. IMHO, the greater risk at this point is in wishing, a year hence, that you'd never sold at 54.
I apologize for the length of this post. Economy of language has never been a strength of mine. I genuinely appreciate everyone's contribution , both pro and con, to this thread.
Enjoy the day. |
