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

To: Boplicity who wrote (61387)	1/10/2000 11:36:00 PM
From: Steve Warkentin	Respond to of 152472

a great post on QCOM from YAHOO "Rich Janitor": " A response that I gave to a relative who forwarded the 'fool' article to me. He missed two very important facts: 1. QCOM sells more than just IP. They sell chips for wireless technologies. In fact they will sell chips for all 3G wireless technologies. If QCOM was purely an IP play, I would agree with the article, but anyone who understands QCOM, understands that their goal is to sell chips. Every phone needs a chip, thus there is no difference between QCOM and Nokia from his 'rule' perspective. Actually the difference is that profit margins on chips are 35-50% where on the handsets themselves, margins are closer to 15%. This is a major reason why QCOM sold its successful handset division. Which brings us to the second point: 2. Never buy a commodity. Look at Dell, CPQ and GTWY. Constant competition and constant price erosion. Constant threat of new competitors. Then look at MSFT and INTC. These are true Gorillas because whether consumers by a GTWY, CPQ, Dell or IBM - MSFT and INTC are making money. Big money. Bigger margins. Who makes the most money when Dell sells a computer? Who has the largest margins? The same rule applies to wireless. IMO, this guy has totally missed the mark. He thinks that a cell phone is an empty shell of plastics and doesn't understand that it what is underneath that makes money. QCOM's royalty revenue is gravy. They currently have 85% of the CDMA chip market and their chip line up for 2.5 and 3G technologies is matched by no one. This is where their future lies. In his scenario, companies like Intel and Texas Instrument are worthless. I own Nokia and MOT, and anyone in this industry would agree that their growth potential is a fraction of what QCOM's is. In fact they both use QCOM chips in their products because their internal chips are twice the price and half the performance of QCOM MSMs. Actually Nokia has not switched yet, but they may soon. In summary, I could shoot holes in this article all day. I'm sure this guy wrote the same thing about Intel 7 years ago when the crazy bastards predicted that 50% of the population would use computers. No vision=no money."