Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 137.30

+0.7%

3:59 PM EST

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To: JGoren who wrote (19269)	12/8/1998 8:56:00 AM
From: Jon Koplik	Read Replies (1) of 152472

To all you people agonizing over "low" (and declining) handset prices -- Have you ever thought through the economics of what it means to sign up one marginal (paying) subscriber (to a wireless service OR cable TV service OR Internet service OR even some magazine) ? Let me use Internet service as an example. If I sign up for $20 a month, that is $240 a year. How large an amount of U.S. Treasuries do you need to produce $240 a year ? Well, at interest rates of around 5%, then it is 20 times $240 or $4800. If you assume that the marginal cost to an ISP of having "me with them" is near zero, then me walking in the door and signing up is EXACTLY the same as someone donating $4800 worth of T-bonds to the firm's corporate balance sheet. Another way of looking at this is : the marginal, new subscriber makes the business worth an incremental $4800 if the business were to be sold the next day. Now, do you understand why agents who bring in new subscribers are usually given compensation ? If a $30 cheaper handset brings in lots of new wireless subscribers ... believe me, the service provider is not crying over the additional $30 subsidy on the handset. Jon.

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