The main difference between QCOM and the other companies mentioned in your post (sunw, jdsu, emc, ntap, lu, nt, csco, intc, dell) is the difference between proprietary technology for which there is no viable substitute (CDMA) and commodity products, where there may be patented technology, but there also are substitutes. GSM is at best a poor, higher cost substitute for CDMA.
The difference between companies that have unique products and those in the commodity business is summed up in one phrase: profit margins. They will be high for unique products and low for commodity products, particularly in periods where there is a glut of products, as is the case for many of these commodity products.
The mistake that many investors make is NOT differentiating between commodity products and unique, patented ones is that while the price earnings ratios of both groups may look high, the profit margins for companies like QCOM justify a much higher PE than that for the commodity producers.
Bottom line: Even in a depressed stock market where economic conditions raise great future uncertainties, a PE of 60 for QCOM is more reasonable than a PE of, say 20 for the commodity producers.
Art |
