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Technology Stocks : The New Qualcomm - a S&P500 company -- Ignore unavailable to you. Want to Upgrade?

To: J Krnjeu who wrote (10472)	5/19/2000 8:10:00 PM
From: Don Edgerton	Read Replies (1) \| Respond to of 13582

Some thoughts from a book I'm reading - with which I agree plus my own ramblings. Nature of U.S. economy has changed from focus on manufacturing to service and knowledge based. Therefore traditional productivity measures are hard to apply. Productivity increases reflect the change in labor input per unit of output. However, with something like software, once the labor is input and the product is developed, the incremental labor to produce added copies is almost zip. Not so with a or other physical things such as cars. The change in manufacturing technology for things like chips and motherboards has been huge. A chip is in many cases like software. Most of the cost is in the development (which is mostly done in the US). Most of the output labor is in the fab which is frequently overseas. One chip is much more powerful than the earlier generation -so in fact the unit of output is substantially different. So if we measure the unit of output as transister equivalents on a chip as opposed to a chip itself - then productivity gains have been exponential. Same with cell phones. New ones probably take less time and cost less to manufacture - yet carry substantially more capability. Another issue is price measurement. Who decides where the prices are measured. Doubt if the hypothetical shopping basket is shopped on the web. Anecdotally, every time I go to Circuit City prices are lower and capabilities more. Only areas where I see price rises are gasoline - and cigarettes. Both of these may be attributed to the government -not normal supply demand factors. MO and RJR would not have been jacking up prices were it not for the government extortion of reparations from the cigarette companies. Ask any tobacco farmer - it sure isn't the prices paid to growers that are going up. They are being screwed on price as well as the demand side. Government inaction in building oil reserves during $10 a barrel days, left no buffer to use those reserves when OPEC cut back. Also, embargo on Iraq screws taxpayer both ways. WE pay for the costs of maintaining the "no fly" zones and keep the Iraqi oil supplies to the market constrained. This doesn't have a lot to do with QCOM other than FED actions and DOJ actions have burst the bubble and taken QCOM down with the trash stocks that never have and may never make a profit. RE the Nokia comments on 70% US wireless penetration by 2003. A doubling of penetration is an annualized growth of about 25%. However, most users seem to replace their phones at least very 18 months. So units sold should in fact grow in the US at 35% plus per year. With the migration to CDMA, this should mean that QCOM revenue for chips and royalties should grow at least 40% per year in the US. Japan may be faster because of the earlier rollout of 3 G and the propensity to switch phones more frequently. Add the rapid spool up in Latin America and potentially China - 50% per year growth should be easily achievable by QCOM. This could possibly be sustained in the out years due to the beginning of broader based 3G royalty stream and continued "replacement" of phones in a much larger user base.