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

To: carranza2 who wrote (114342)	2/25/2002 10:41:04 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 152472

Peace. yes. Olive branch accepted, and extended back in kind. I'm not here to pick fights. I thought there were enough smilies in my post to you that you'd see I was chortling in my response back to you. If not, sorry to have left the wrong impression. I do hope you also notice I'm trying to keep my head amidst the slander and inuendo that's being slung my way. Frankly I think that rather childish (and ignorant) behavior reflects poorly on the thread and on those who indulge. Being insulted for the complexion of an investment point of view... merely because it is different? How adult is that? Can't intelligent people spot risk signs and have a negative opinion on an investment without being slandered? Sheesh... </rant>... not directed at yourself, just at the board in general. <sigh> On pro-forma/GAAP and elsewhere I dare to suggest you are saying the same thing as me. Perhaps without realizing the degree to which we agree. To paraphrase your post: Interpretation of what appears in GAAP has its place. Unless one is willing to dig deep into the bowels of the SEC filings one is running risk. Risk of what? Of missing something important to the price. Now we are agreeing. I mention MO and note the cash machine. You could correctly suggest that cash flow notwithstanding, the economic consequences of cancer litigation risk affect more than 10% of the long term value of the firm. Someone else mentions QCOM and notes the cash machine. And I suggest that although mentioned in the 10-K, the economic consequences of cancer are extremely unlikely to affect 10% of the long term value of the firm. And then I note that exactly the opposite is true in the case of Stock Options! Neither the full economic cost of stock options nor that of cancer are included in the GAAP numbers. For either company. Yet should we ignore both? As investors, only to our peril! Do we spend time working out both effects (plus inventory write downs and one time restructuring charges and spin-offs of businesses and so on) for both companies? No, only if it makes a meaningful difference. No sense getting 3-digit accuracy on hindsight. But should we tolerate less than one digit of accuracy? Not if we are using hindsight to calibrate our foresight! So we compute what matters. At which point it becomes a matter of interpretation. Do you think the economic cost of stock option wage subsidy is a significant element of doing business? For MO, they certainly are not. For QCOM? Sure they are. We have already established undeniably that folks like engineer would not have done what they did had it not been for stock options. And I have rather conclusively shown that even in the most recent quarter shareholders are subsidizing employee income on the order of a third of earnings. So it's real, and it's big and it's important to the continued health of the business. And shareholders are footing the bill. Might want to add that to the "investment" column before we rush off computing returns on only part of our investment. Is this claim of mine an allegation leveled at Qualcomm alone, and with mischevious intent? Certainly not. To both questions. It is just an observation and a matter of fact. Which facts seem to have many people completely bent out of shape. As if I am somehow accusing the company of doing something wrong. Hardly. Normally (average, all companies, all sectors) stock option wage subsidy represents an insubstantial cost element of the business model and it's not worth the time or effort ferreting out how many were exercised and at what price just to get a refinement on economic cost that affects third significant digit of an EPS number. But in tech land this is not the case. The refinement hits the first and second digits. Altering the perspective of cost/benefit by factor two or more. Not because stock options are accounted for differently. No, the world according to GAAP is very uniform. So if it's uniform, why bother even looking? Aren't all GAAP earnings equal then? No. Because of the number given out and the behavior of the share price and the positive feedback loop that joins these two factors. I think I have shown fairly conclusively that just by issuing stock options we can inflate cash flow, decrease employment cost and thereby overstate Earnings, Shareholder Equity and apparent economic profitability. This is not wrong. It's normal. And it's a pain in the rear to compute. But that doesn't make it non-existent. What's wrong is for shareholders to insist they should ignore a substantial cost of doing business. Just like they would be wrong not to ignore the cancer litigation risk (and any other moral hazard) involved with investment in MO. In the end, I think you can see that I am fully aware that we must take the GAAP numbers on their face. And then adjust for stock options and cancer litigation and one-time effects and any number of other aspects that do or don't appear in GAAP accounting to a degree appropriate for the business. Some folks have been insinuating that I have an axe to grind against Qualcomm. Or that I am short. They are allowing their bias to cloud their judgement. Nothing against Qualcomm, and no position. Yet. If I was short it would be on the flakey go-go companies likely to evaporate. There are enough of them! I'm following the QCOM thread 'cause it's on my watch list of stocks to buy when the price is right. Any issue I might have is with individual shareholders. Who do not see (and some who refuse to see) where the money is coming from and where it is going. Nothing to do with the technology and whether or not it will conquer the world. Everything to do with how folks are making money. And who these folks are who are making this money, and whose money it was to begin with. You suggest wading through the SEC filings and that I will discover all therein is "OK". Indeed, I have waded through Qualcomm's financial reports in considerable detail. And confirm that yes, everything is OK. And reiterate that they reveal quite clearly that more money is sloshing around than meets the eye. And a lot of it is coming from the pockets of Qualcomm's shareholders, not just the pockets of shareholders of Qualcomm's customers and licensees!!! Which in the end is where the future riches must come. John