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

To: tinkershaw who wrote (51118)	4/25/2002 4:15:16 AM
From: Jacob Snyder	Read Replies (1) \| Respond to of 54805

re: QCOM, AOL, and GAAP vs. reality: Actually, I agree with your take on AOL-TimeWarner. AOL used the brief window of opportunity, when investors (temporarily insane during the Bubble) actually thought the company was worth something. AOL bought a real company, and paid for it with the shares of their own UnReal company. A shrewd bit of trading, greatly to the benefit of AOL shareholders. But this is not a good analogy for QCOM's Division of Strategic Misadventures. When QCOM puts money into ventures like Globalstar (and many others, unfortunately), they spend dollars, not QCOM shares. Some of the investment is in the form of QCOM equipment, but mostly it's cash. Real dollars. They spend the cash flow generated by their chip and licensing divisions. And that cash has a tendency to go away and never come back, disappearing into Globalstar (and many others, unfortunately). If QCOM were using their cash to invest in real companies that had decent LT prospects (like Time Warner), that would be OK. They might end up looking like a weird conglomerate, but at least they wouldn't be destroying capital. If they were using their own overpriced stock to invest in those companies, that would be OK, too. Imagine if, instead of buying Time Warner, AOL had bought a bunch of internet companies like DrCoop.com. Companies that spend a lot of money, to put in the infrastructure to serve a market that, oops, doesn't exist. Companies that will never return the investment put into them. Companies whose purpose is to ProveTheConcept. If AOL had done that, it would have been a disaster. My problem with QCOM's Strategic Investments, is that they don't seem to have learned anything from the Globalstar fiasco. Anybody can make a mistake, even a big mistake. But I expect competent management to have a learning curve, and not keep repeating those mistakes. Years ago, they needed to take those risks, to get CDMA on the map. They shouldn't need, at this point, to take these risks, to ProveTheConcept. CDMA (one flavor or another) has been adopted, right? It is the global standard, right? So why do they keep on pissing away so much money (real dollars), on bogus Concept companies?

To: tinkershaw who wrote (51118)	4/25/2002 2:09:29 PM
From: Ali Chen	Read Replies (1) \| Respond to of 54805

"The loss has no material meaning whatsoever in this case, and it demonstrates how accounting mechanisms do not determine value of a company." I am not sure about this particular case, but there are many other cases when deceptive accounting creates wrong impression. Examples include "one-time acquisition charges" that keep incurred on regular basis for years, and horrendous amounts of stock buy-backs that exceed formal profits for years as well. Therefore I think your generalizations are wrong. Here is my generalization: Investor's reality is perception. Perception is formed on the basis of reported accounting metrics. The new metrics changes the rule of the game. It takes time for mom-n-pop "investors" to digest new rules. - Ali