Maurice, I agree with you that QCOM has a lock on the future with its CDMA patents. But how fast can its profits grow? It's an absolute fact that world wide, many small telcos are going bankrupt and most of the large telcos are either deeply in debt(Europe) or seeing very slowly growing profits(US). All of these will very slowly buy the CDMA infrastructure for fast wireless transmission of data. Why slowly? Because of their lack of money and because of the lack of any huge demand. Users are satisfied with voice performance of non-CDMA systems. Who needs data transmission on a hand held device? Only a small group. There is a niche market, say for managing fleets of trucks, taxis, transmission to airplanes, and sales people who will be asked complicated questions that they need the company data bases to answer. All these relatively small markets, relatively small compared to wireless voice, need time to develop. So where is the application that the man in the street will leap to buy? Picture transmission, absolutely. That's 3G, super 3G, not 2.5. That will take 5-6 years to take off. Meanwhile expect the company to increase its profits only slowly. When picture transmission takes off, it will be another INTEL or such. But, stock buyers are not so interested in 5-6 years hence. As for profits from China they have to be discounted when you realize that there are powerful forces in China which are actually opposed to CDMA, and various other reasons to wait until the cheques clear. Are Intellectual Property rights recognized in China? I don't know. If so, it's certainly a new concept.
I may be wrong about all this, but I have been watching QCOM for a long time. I don't consider myself pessimistic about QCOM. It may be an excellent stock to buy at these levels and constantly sell covered calls, expecting not much upward or downward movement, as the steady(though slow) growth and the glorious future way down the road, combat the high P/E. 60 times earnings is a high P/E.
Good luck with Qualcomm. I think the company itself is excellent, forgetting about the share price. |
