"However, try and separate the two jobs. What makes you trust Qualcomm as an operator or as a fund of funds? Are you comfortable knowing that Qualcomm had ~$800 million in mortgage securities or $2 billion in the equity markets? and if so, why? What gives you confidence that they will turn MediaFLO around"
Slacker:
I see your point but let me contest for a moment the notion that QCOM management has two jobs. I hope that my writings bear a respectful tone because I am not under the delusion that I know even a fraction of the amount you know about the stock, its management, and its history. So it takes a lot of nerve for me to quibble with your argument. That said....
Does QCOM management really have two jobs? I would say no. The QCOM mission statement is really to make the most money for the company, not to think of itself as a fund of funds or as a philanthropic organization. Qualcomm should maximize return on capital. To that end, all efforts should be directed.
Management's position, and again I realize that I sound like I'm working for them, is that the company will do best long term if the company invests some of its earnings into expanding the entire wireless ecosystem. So while it is true that BREW has not yet become the profit center it might have been (and might yet become), BREW has inspired Apple to create the App Store. More business, more 3G connections, more smartphones, and potentially more silicon revenue. And more smartphone competition. If Snapdragon does nothing else, it has spurred many other companies making competing products-- which will allow the wireless universe to vastly expand. And I think it is clear the company will make some major cash on the Snapdragon. Furthermore, QCOM management should pay a small dividend but I'm not in this for a dividend. So giving every shareholder back a dollar or two as a special dividend seems silly to me. Here we have some of the most sophisticated wireless engineers in the world designing an entire wireless system and we should take money out of the enterprise? Does that make sense? Or would we be wise to let these insiders invest in companies with big futures? They have made some mistakes. (I blissfully unaware of the worst investments.) But they will also picks some winners. That's life in the world of venture capital. Most of the cash will be pissed away but some will hit and hit hard. I remember back in the .com days, the most lame ideas were suddenly valued at incredible multiples. Might the same thing happen as the world investment community discovers that despite economic slow growth, wireless is expanding without bound? Little companies with investments from QCOM shareholders might experience a surge of investor interest. And what's the downside? With $20 billion in the bank (and we're only a $60 billion company), are we taking excessive risk by throwing out a little seed money?
So I don't think that we should see the company as a company with two purposes: one to make money, one to invest money. I see it as a company with one purpose: make money. And you have to admit, even subtracting their flops, overall they have done remarkably well.
The Jacobs family has not hurt anyone here. In my opinion, Irwin deserves the Nobel Prize. And the improvements which will be brought to undeveloped countries and poor people living in poor countries will be life changing. Shouldn't you consider, and you know this pains me to say, cut management a little 'slack?'
Thanks for your devoted service to the board and your many insights.
j. |
