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Technology Stocks : CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST!
QCOM 174.23-0.6%Dec 22 3:59 PM EST
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To: Allen Benn who wrote (1381)12/29/1996 10:52:00 PM
From: Jason Cogan   of 1819
 
Once again Alan, a very good piece of analysis, and another great find. I have read through their most recent 10-K, and am very interested. I just have a few questions.

1) What is behind Qualcomm's difficulty in bringing manufacturing costs in line? If the typical telecommunication equipment business typically makes 10% net profit, why are Qualcomm's expenses so much higher? Where are they manufacturing their products, and what developments do you think will allow them to their bring their manufacturing costs in line?

2) Even more, why bother to make the equipment at all? If their technology is so valued that other manufacturers are willing to pay royalties, why bother manufacturing at all? Why not just sit back and collect the royalties, thereby increasing margins all the more?

Admittedly, I know very little about the telecommunications industry, but I agree with you that the key to this company seems to rest on manufacturing costs. Revenue growth seems to be clipping along at a tremendous pace, suggesting that overall acceptance of their CDMA technology is not the problem. Costs are. As always, your thoughts are appreciated.

Jason.
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