Dave & Doug:
Doug, you should reread the Q1 10Q before flaming Dave. The company demonstrated pretty decent operating leverage during that period, and was poised to improve sequentially had Korea stayed out of the can. People keep trying to characterize QC as a manufacturing failure, but that just is not the case. Simply put, we have a portfolio of businesses in various stages of development, with Omnitracs being the most mature and infrastructure operating in start-up mode. It's strange to me that people can readily accept start-up losses at companies like America Online or Yahoo, but expect QC to achieve overnight profitability according to some preordained timeline derived from some analyst's rectum. Remember guys, CDMA was launched commercially less than two years ago--we are very, very early in the race.
The company is spending a fortune on infrastructure R&D; ditto for the sales and marketing expense necessary to establish a presence in far flung countries from Ukraine to India to Chile. The expenses may be impacting our desire for immediate gratification, but if you spent some time with Irwin Jacobs, Harvey White or John Major (president of the infrastructure group), you would understand that the company isn't managed by a group of wide-eyed idealists fantasizing about something unachievable. As I said before, management expects the infrastructure group to achieve profitability within four quarters (P.S. the P&L impact will be very profound). Isn't anyone listening?
Dave, I think you overestimate the shorts. Short-sellers, by definition, are traders not investors. They look for a near-term catalyst to create disappointment and crater the stock. To the uninformed it seems perfectly plausible that the Korean slowdown will hit QC with a double whammy--reduced royalties and lower ASIC sales--thereby wiping out earnings. The matra is simple: Korea accounted for the bulk of the company's trailing profitability, therefore the company HAS to be doing poorly. As we have discussed ad nausem, these people simply do not understand all the moving parts and inter-relationships. By underestimating CDMA growth outside of Korea, and quite possibly overestimating the magnitude of Korea's own slowdown, the shorts may well have painted themselves into a corner.
As for the spectre of handset competition, let me try this one more time. QC deliberately licensed these companies; QC wants them to introduce products; QC wants them to make money and pay royalties. How can people, on one hand, complain that QC's handset margins are too low, and on the other, complain when licensees introduce competing phones, based on the QC chipset, which bolster the royalty stream payable to QC. As for the standards debate, the Lucent/Philips agreement should paint a pretty clear picture. Whether the outcome is IS-95, IS-95C or W-CDMA, it is now clear that QC is extremely well positioned regardless of which becomes the worldwide standard.
Patience is a virtue!
Best regards,
Gregg |
