Daniel:
Hyperbole is in nobody's interest. Worse, what exactly would you do with my outlier model...treat it as gospel? I was attempting to direct to Forum's intellectual energy towards the real analytical challenge, i.e. understanding Qualcomm's earnings power in the 2001-2003 timeframe. In my judgment, far too much thought is given to the June quarter's results at the expense of understanding the real drivers of shareholder value.
Think about it this way. IBM's decision to standardize its PC on Microsoft's operating system launched Bill Gates' juggernaut. It would have been easy to dismiss MSFT's stock back in 1986 because of its high PE multiple. However, analysis of the next quarter's EPS for MSFT was really a fool's exercise. The truly prescient would have spent their CPU cycles contemplating the size, scope and breadth of the PC opportunity and Microsoft's positioning within this context. The problem was, and is, that the total opportunity was, and is, extremely difficult to calibrate partially because Microsoft was able to leverage its operating system franchise so effectively into the applications space and other endeavors.
Now, let's think about Qualcomm. With CDMA's future sealed by the Ericsson agreement, QC is positioned much like Microsoft was in the mid-1980s in that its core intellectual property has become the 'operating system' for next generation wireless systems. Those still fighting the GSM-CDMA battle just don't get it; the GSM network protocols will endure but the TDMA air-interface is a goner. Next generation GSM will be based on CDMA; GSM=CDMA; long-live GSM. Within this context, Microsoft extracts a royalty, through the operating system sale, on every PC sold. Qualcomm extracts a royalty, through its contractual agreements, on all mobile-CDMA equipment sold. See the symmetry? In my mind, QC's handset division parallels Microsoft's application business. Microsoft used its understanding of the operating system to build better applications and eventually ran most everybody else off the desktop (with the exception of a weakened Lotus). Qualcomm has the potential to achieve similar success with QPE's wireless appliances. However, Qualcomm's model is more cooperative than MSFT's in that its ASIC business, i.e. the 'brain' for CDMA equipment, is available to the industry. This parallels Intel's model vis-a-vis the Pentium. I could go on, but you should get the point.
So, all the effort to calculate next quarter's earnings is, to my mind, a fancy exercise in mental masturbation. Get it right and the delta to your net worth is +- 20%. However, if QC's business model is as strong as I suspect, the three-to-five year delta to your net worth could be exponential. Let the children on Wall Street scratch and scrape over the next quarter's results; let the hot money trade in and out and maximize their taxes while minimizing their return; let the chart reading clowns and noxious shorts play their little games. Stay focused on the big picture, be an investor not a day trader, and try to get the long-term analysis right. Enough pontification..
Best regards,
Gregg
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