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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (11927)	12/3/1999 11:00:00 PM
From: Ruffian	Read Replies (1) \| Respond to of 54805

A Post Worth Reading> s Q really a Gorilla? always_saturday 12/03/1999 03:41 pm EST Or can it ever become one? As I started reading this board I came away with the understanding that the really knowledgeable investors in Q believe that Q is, in fact, already a Gorilla. Having just finished “The Gorilla Game” I suspect that this is not true. Convince me that I am wrong! I am very long on Q. “The power of the gorilla is based on its control over a value chain.” “An architecture is proprietary when it is under the control of a single vendor…””Architectures can be controlled by a single company or by a group. When they are under the exclusive control of a single company, they are called proprietary. The opposite of a proprietary architecture is one that is controlled by some form of committee---a standards body or consortium. Having proprietary control over an architecture at the heart of a tornado market represents the acme of gorilla power. Microsoft has it, Intel has it, and ‘Cisco has it: and their market caps reflect it.” In my opinion Q clearly does not have control over the architecture. The standards are being chosen and governed by a committee. Now once the entire world creates a CDMA architecture, the high switching costs would preclude another standard. But even at that time, Q could not “change the standard to keep it's competition off balance.” Q would not have control over the value chain as well. The royalties no doubt would be vast but the Nokias, the Ericsons, and the Motorolas etc. would not be playing chimp roles. Q could not “suck them dry” forcing them to stay in the value chain. The only way Q could improve it's profit structure would be through innovation and then whether or not players would join in would be based solely on the economic interests of the carriers. They could develop their own products (albeit paying q royalties) and go their own way. The royalty game is more of a King, Prince, and Serf play…So what I'm saying right now is that I believe that Q is not yet a Gorilla despite the royalty income that will probably befall it. That's not to say that Q can't become a Gorilla. If they become rich enough perhaps by acquisition they can gain control over the value chain. By selling off the handset div., they no longer will have customers coming directly to Q for their cell phones. They therefore are relinquishing any control over the market and value chain selling wireless phones. Now HDR represents another possibility! They might be able to control the standard for that and once the world clamors for HDR then they would achieve control over the value chain for HDR as wll. What this means to me is that although the original investors have seen phenomenal growth in the “bowling alley” phase, very long term investment in Q is not as relatively safe as it would be if Q were an established Gorilla. In fact, following the principles of the book, assuming Q is not yet a gorilla and the tornado has yet to start, I am far too heavily invested in Q. Whether this represents the rest of the board as well,I have no idea. The tornado that we all expect to see will be a tornado of cellular phone growth and Q of course will strongly participate but it won't be Q's tornado. Can Q become another “ten bagger” for those of us who are recent entries? That could still happen playing a King's role but it wouldn't necessarily be “in the bag” (no pun intended.) It will mean that more close attention is necessary after the original run up because there would be no assurances that Q would always bounce back without the true power of the big primate. Where is the flaw in my thinking? Please convince me I'm missing something. I want to BELIEVE!!!!

To: Mike Buckley who wrote (11927)	12/6/1999 3:38:00 PM
From: Climber	Read Replies (2) \| Respond to of 54805

Mike, OT Thanks for the warm welcome to the thread. However, I'm afraid to say you've made a serious mistake, and for the first time since I've known you, you DO need an editor. You indicated that I helped you learn about investing when it really was the other way around. It would probably be an unwise breach of copyright to post some of your work here, but I've saved many of the short articles you wrote that helped me and many others understand a bit about this game. You opened my eyes to one thing for which I'm particularly grateful, and that's the many-sided advantages of giving appreciated stock to charitable causes, and why it makes so much sense to do so in lieu of giving cash. I've reprinted that article ("Give Til it Tickles") and passed it on to dozens of people. Unfortunately, I can't find the original in the Fool archives. I know this is really OT, but I believe that one piece made a significant impact on many, many people, and on the charitable orgs they support. I hope I can go back and discover a link to the original, because it was essential "Foolishness" at its best. As for your sense of humor... I still have the "Fool Song" you taped and sent to some of us, which highlights beyond any doubt the breadth of your merry motleyness. I just need to figure out how to get it up on the Web on a Real Player so all can enjoy. <vbg> In the meantime, you'll be relieved to know this will probably take me another 5 years since I'm rather incompetent in that regard. All the best, Climber