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

To: kech who wrote (113277)	2/14/2002 1:16:02 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 152472

Tom - I suspect that it is more complex than that. It appears to me that there are a handful of pivotal patents that position Qualcomm on the tollgate to CDMA. At least, it always works this way in the patent-cross-lisencing activities I've been familiar with. We shouldn't expect Q to be any different. It's not like they have the only patents in the area. Just a bunch that are "more important". And more important by a large margin. No dispute. Which bunch will expire. If they expire without generating shareholder equity or dividends, well that makes them technically "worthless" to shareholders. Rather than try to predict the future, our task as valuationists (if that's what we are) is to model this value creation and ask ourselves whether the necessary underlying assumptions could be satisfied by reality at some time in the future. I have found it very difficult to construct a model that has the company raking in (and keeping) 30 billions in after-tax present value profits from its IPR without making assumptions that depend on a discontinuous departure from the recent past. Sure, 3G may be just around the corner. But there is a risk that 4G or something else ('.11) may eclipse it in relevance over the life of whatever IPR exists. CDMA is a bit-transport protocol, and one amongst several that will do the job. Perhaps it is "the best" according to one set of criteria. But it's not clear that this criteria is what the jury's always going to use. And sure, there is always new IPR being cooked up. But we have to be very careful placing value on IPR that hasn't been cooked up yet. Indeed, history shows that the most valuable IPR isn't created by the incumbent, but to the innovators out of sight in the weeds. 30 Billions invested in T-bills generates 1.65 billions (about $2.20 per share). Q is lagging by a bit, but not as much as it was when priced as though worth $9.00/share. So if shareholders want to catch up, break-even, and turn a healthy profit, then they might want to suggest to the BOD that management kick it up a notch. Alternatively, Q will catch up by having the size of the equivalent pile of T-Bills reduced. Which isn't a pleasant outcome for anyone contemplating owning shares at today's price. I note that the revenue stream of QTL is currently 210/Q or about 840 M$/year... about half of the equivalent pile of T-bills to today's price, and not exactly rocketing upwards (vs. 780 M in '01 and 705 in '00 ~ 10% pa). So I get a fair price for the enterprise closer to $20 than $40, assuming my fair price includes some profit potential to offset the risk.