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

To: Stock Farmer who wrote (118918)	5/18/2002 1:49:42 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

At this rate Qualcomm will generate the remaining $32 (or thereabouts) market value for a shareholder purchasing a slice tomorrow in about 1,600 years. John, i think you're being entirely too bearish! i expect QCOM will accumulate $32 per share in retained earnings in no more than 100 years, so i guess i'm 16 times as bullish as you are :)

To: Stock Farmer who wrote (118918)	5/18/2002 5:55:03 AM
From: Clarksterh	Read Replies (2) \| Respond to of 152472

John - Qualcomm issued more shares due to stock option exercise and incurred a cost to shareholders equal to the difference between fair market value and exercise price. Not so fast. This is the whole trouble with accounting for options. There is no obvious 'right way' to do it. But I would say that yours is without doubt the wrong way. In what way did they incur a cost equal to the difference between fair market value and exercise price? Did they create a formal debt with all of the problems associated with servicing it? No! Did cash flow get hit? No! So how to account for them!! Did they dilute the current shareholders claim on equity? Perhaps. But by how much? Not by (share price)x(number of shares) as you are claiming!!! In fact, since the equity per share was approximately equal to exercise price, they did not perform much of any dilution. The only dilution was that retained earnings per share went down by the dilution percentage which by your figures is less than 1% in a half year or 2% per year. Not a particularly big impact given that retained earnings grew at whopping 75% over the same timeframe. Bottom line - It certainly isn't great if Qualcomm continues to grow retained earnings by the amount that they have over the last 2 quarters and increasing by 10% per year all while diluting the stock base by 2% per year. But neither is it the utter disaster that you predict. The reality is much more like your first scenario when you didn't account for stock options. But of course even this assumes that the earnings grows at some steady rate, but the bull's assumption is that earnings will jump up from their recession levels and grow from there. Is this correct? Only time will tell, but you are no longer making a new argument. Clark