Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Nokia (NOK) -- Ignore unavailable to you. Want to Upgrade?

To: Labrador who wrote (5618)	6/18/2000 7:30:00 AM
From: NAGINDAS J.O.PATTNI	Read Replies (1) \| Respond to of 34857

IHMO the cash cow will become a bull and it'll be fun looking at i.j. trying to milk it. nagin

To: Labrador who wrote (5618)	6/18/2000 8:11:00 PM
From: Puck	Read Replies (2) \| Respond to of 34857

QCOM management has said that their royalty agreement with ERICY for 3G base stations is around a couple or several percent of sales, though they won't be any more specific, which is understandable. It seems reasonable to presume that they will reach a similar deal with other manufacturers, NOK included, but you never know because their situation with ERICY had some unique elements. Don't forget that QCOM's cross licensing agreement also requires them to pay ERICY royalties as well on ERICY's intellectual property, which is formidable. Indeed, some industry observers believe that QCOM may be paying ERICY as much in royalties as they receive, so that the agreement is in reality revenue neutral to both. Such royalty streams may allow QCOM to become a percent or two of the size of the industry size, or at least approach those figures, but perhaps not. Pretty, oversimplified theories often have ugly little details in reality to contend with. Personally I'd rather cast my lot with the whales rather than the minnow. QCOM management has also said that while they're satisfied with the licensing agreement they have with ERICY, and presumably will have with all the other manufacturers, that their licensing revenue stream will only take them so far and that they are banking for much of their future growth on selling chipsets to the manufacturers and on the commercialization of their HOLDR technology. While it is obvious that QCOM will grow in some proportion to the 3G infrastructure buildout, I believe that QCOM believers have not attempted to interpret in a realistic way how this will play out in QCOM's discounted future cash flows, EPS growth rate, and stock valuation. Their assumptions are delusionally over optimistic. Most every day we get more news that the realization of those anticipated future cash flows is getting pushed out farther and farther in time--in years, not months--and QCOM's market price has been reflecting that reality. How far out should one bank on the future? QCOM believers have come up with one solution, though I suspect that it will be a bad one. NOK, on the other hand is within a point of its all time high, has discounted in its stock price only earnings growth anticipated over the next four Q's and has a growth rate two and a half times that of QCOM in the here and now. Only one of the two is bringing home the bacon in a big way, which, in the end, is what counts. I also suspect that QCOM believers are living in the past, the magnificent run-up in QCOM's share price over the past year so green in memory. The licensing agreement and sale of its infrastructure unit with and to ERICY was obviously a great event for QCOM and converted it from a money losing to a money making company, no doubt about that. But it was a one time event that will not be repeated. There will be more licensing agreements but no more divestitures as the company is currently constituted. One final thought: consider that QCOM management has said that no infrastructure provider has shown interest in using the HOLDR technology and that QCOM may choose to become a manufacturer again to ensure that HOLDR is incorporated into a marketable product. This would obviously be a major profit drag on QCOM with an unpredicable outcome. QCOM has no leverage with HOLDR to force feed it to the wireless industry as it did with its CDMA patents.