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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (38459)	8/22/1999 4:35:00 PM
From: KyrosL	Read Replies (2) \| Respond to of 152472

Jon: the valuation conclusions in the Barrons' articles are incorrect IMHO. My main problem with the articles is that they adjust past company profits for inflation and arrive at a lower figure for profits for the 70's and 80's, but curiously fail to adjust interest rates for inflation! Although profits were arguably lower than reported because of inventory profits caused by inflation, real interest rates (as opposed to nominal) were relatively much lower as well. In fact, there were periods when real interest rates were negative. So using real rather than nominal interest rates, stock valuations back in the 70's and 80's were much lower compared to today -- a radically different conclusion than the conclusion in the articles. Another obvious problem in the articles is the argument that R&D should be capitalized rather than expensed. Most products nowadays have lifetimes measured in months rather than years. Ask any software company what would happen if they stopped updating their programs for a year and you will get a simple answer: we will go out of business. Ask any PC company what would happen if they do not come up with new PC models for a year, and you will get the same answer -- ask car companies, electronics companies etc. etc.. True, there are are some products, such as SUCCESSFULL drugs, whose R&D pays off handsomely for many years for the drug companies that develop them, but ask these same drug companies what PERCENTAGE of their R&D results in SUCCESSFULL drugs and you will be shocked (it is LOW). In other words, treating R&D as anything other than current expense is ludicrous -- always IMHO.