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

To: Thomas Mercer-Hursh who wrote (38470)	1/26/2001 3:51:55 PM
From: gdichaz	Read Replies (1) \| Respond to of 54805

It certainly is best to be conservative in counting earnings. Let's think about this. One example of an evolution from a equipment company to a major lending company is GE. Does GE count its net proceeds from its "banking" as earnings? Suggest it does. Another company which counts net gains from investments as earnings is Safeguard Scientifics (SFE). It is an incubator, so that seems sensible, but few astute observers would judge SFE by its "earnings". Qualcomm will be bringing in huge quantities of cash from its license and royalties function. IMO it uses that cash now and proposes in the future as a means to enhance CDMA and therefore Qualcomm itself by investing selectively to advance CDMA worldwide. Qualcomm's management has explained its strategy on that clearly and carefully. It may well be that Qualcomm will be a hybrid (such as GE is) in the future. Look forward to that. And again, all is open and above board. What you see is what you get. Those who wish to shift the pieces around are free to do so. I would suggest that this reminds me of my concern that "earnings" should be "pro forma" and that meaningful PE's reflect pro forma not actual, i.e. PE's which exclude one time events are more meaningful than those that don't. (Though I think PE's are a weak measure anyway measured or calculated - but that's just my view) Again, net cash flow is probably the best metric to use as a proxy for financial performance. Perhaps that is what needs to be used with Qualcomm. But bottom line for me is that what matters with Qualcomm is quality. By most measures Qualcomm passes a quality test with flying colors. IMO proxies for quality are what are needed. Whoever has a good handle on that would do us a service by describing them. Best. Cha2