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

To: Tom Kearney who wrote (91292)	1/5/2001 5:36:10 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 152472

Tom, you raise an important point on book value; namely, that in a company like QUALCOMM, it doesn't reflect the value of the patents. That's why, in looking at book value, one must also estimate intrinsic value by imputing at least some future earning power to patents. Patents themselves rarely occur on the books as an item, unless a company with patents is being acquired. Then the patents might be at least part of the "goodwill" in the purchase price. Most of the QCOM patents have nothing to show on the asset side, and costs can only be estimated as a portion of the research and development budget. One can safely say that for a company like QUALCOMM, the intrinsic value is probably at least three times the book value, based solely on future earnings power derived from patents. This future earnings power would be measured roughly by royalties and net profits from chip sales. Even though we get only an estimate, the purpose of this exercise is to determine if the relationship between stock price and book value is reasonable. Right now, it seems to me the relationship is just plain silly if the value of the patents is imputed into the book value per share. Silly, because the price is so LOW compared to similar ratios for companies that have fewer intellectual property assets. Even if one uses only the book-value-per-share figure, which is admittedly well below intrinsic value, it is useful to measure the year-to-year change in book value per share in order to get a better understanding of how shareholder wealth is being created. To me, this is the only reasonable performance guide, since the fluctuation of the stock price up and down serves more to conceal benefits flowing to shareholders. Even better, one needs to compare the change in book value per share over a five-year period to the same data for other companies. If more analysts went through that procedure, they might have a much better appreciation of why QUALCOMM is the best long term growth opportunity available to individual investors based in the U.S. Art Bechhoefer