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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting

QCOM 177.95

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10:27 AM EST

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To: A.L. Reagan who wrote (25003)	8/11/2002 2:50:42 PM
From: Clarksterh	Read Replies (1) of 196432

ALR - You brought up a good point about the potential for QSI to be a form of Qualcomm tricking itself ala Boston Market or even more so, much of the biotech sector (e.g. Elan which had about 1/3 of its revenues from 'preferred stock purchases' almost all of which was immediately funneled back into Elan as payment for R&D performed by Elan). This is an important question and needs to be carefully scrutinized. But it is a tough one, so it took time think about - hence the delay. The ultimate risk of this is that it is a closed loop. Ultimately any economic system is closed, but the tighter, the more isolated and the smaller the loop the more dangerous: 1) The tighter and more isolated the loop, the more difficult it is to get good metrics (e.g. what portion of Qualcomm's revenues are just their own dollars come back to them). Should they really be counted twice? 2) The tighter loop, the quicker the feedback effect, which means that disaster can sneak up very very quickly. The addition of other companies between the service provider and Qualcomm slows things down and allows more response time. Boston market sinned on both counts (drinking their own bath water and quick response times since the loans). In addition to the structural risks associated with this there is also the perception issue. In today's environment it is a risk have a business model which is opaque and presents the appearance of possibly double booking revenues. I think that with a little work and a little more disclosure Qualcomm could ensure that this doesn't bit them either structurally or perceptually, and I have some thoughts in that area, but I need some more time to organize them. Clark

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