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

To: Uncle Frank who wrote (37154)	12/30/2000 11:50:43 AM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

Frank, I wrote that the quicker Qualcomm's value chain grows, the more powerful it will become. The longer it takes, the greater the possibility that it will be less strong than it would ideally be. You asked me to expand on it. Why do I get the feeling that you're asking me to do your work for you? Is this what I get in return for too many jabs at you on the Mudge thread? :) Seriously, I'm describing a scenario that is probably pretty close to the chicken-and-the-egg scenario. Which comes first? If the value chain grows quickly, it will be because it is symptomatic of the need for rapid product adoption. At the same time, if it does indeed grow quickly, it will foster rapid adoption. As more adoption takes place, Qualcomm enjoys more control (more power) over the value chain. On the other hand, if the value chain grows slowly, that too will be symptomatic of less percieved need for the product. And as a corollary of the strength I described above, the weakness that comes with less adoption results in less strength and power over the value chain. To be more specific about real-world timing, I don't see the value chain growing a lot in the next couple of years in any way that fosters Q's control over its value chain. (I'm not discounting the possibility of some surprises in China and Korea that could happen but as an investor I'm certainly not counting on those potential surprises coming to fruition.) I believe the next spurt of rapid growth will occur in W-CDMA, an area in which Qualcomm happens to have particular expertise and patents, but not an area in which Qualcomm can exercise particular control as Eric regularly explains. On a more upbeat note, I disagree with Century Man if I infer correctly from his comment that expectation of CDMA2000 dominance in 2007 is not a good enough reason to own Qualcomm stock today. I believe in long-term investing and deferring taxes as a means of enhancing after-tax returns. I also believe there are fundamental reasons to expect that the stock will outperform the broad market over the coming decade. In other words, even if the value chain does grow slower than is ideal, I believe that the industry will eventually evolve into an area which Qualcomm will have greater control than it currently enjoys though if it takes so long to get there, the control will likely be less than if it got to that point in just one or two more years. --Mike Buckley