SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 159.42-1.2%Jan 16 9:30 AM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: kech who wrote (113273)2/14/2002 11:43:13 AM
From: Stock Farmer  Read Replies (1) of 152472
 
Tom - there is a technique called "Economic Value Added" estimation, which includes R&D and Marketing (but not SG&A) as an investment, and calculates the future value as a rate of return.

However, R&D focused on consumption of twinkies and cheese doodles is less valuable than R&D focused on the task at hand. And there's always a mix of both the former and the latter in any enterprise. So it's not like one can merely add up the cost of R&D and assume that's what its worth.

Typically, as a discretionary expense, we can expect R&D to generate returns that just exceed the marginal cost of capital. Which opens the whole thing up to agency effects in a company where the cost of capital is very low. Such as many of the tech stocks during the boom years.

As you can see, Qualcomm attracted billions in shareholder capital just by printing shares. This is an exceptionally low cost of capital. So until recently, R&D (lumped in with the other "strategic investments") have not been very productive. A massive agency problem.

However, as shareholders become more informed (curiously, Enron is doing everyone a comparatively low-cost favor), management will be tasked to husband capital more effectively. IMHO this is not exactly a core competency.

Yet.

I would like to see some track record here before citing them as "exemplary". But that's just my preference.
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News