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

To: Wyätt Gwyön who wrote (118962)	5/19/2002 7:26:05 PM
From: Maurice Winn	Read Replies (1) \| Respond to of 152472

Mucho, I used to be involved with cost-of-capital research and development in BP Oil International. In an old industry like fuels, there are few new tricks to come up with and any new tricks tend to be marginal increments for niche markets. So, the Research and Development expenses are no more valuable than the coffee machine in the marketing department; they are just a cost of staying in the game with returns not far above the cost of capital. Without a coffee machine, employees will quit and go to a competing company that better balances employee rewards [assuming a coffee machine is the best way to spend a dollar to reward employees]. Without an incremental improvement in some arcane aspect of the fuel quality, a motor manufacturer's specification might not be met and sales people will have reduced prospects for making an incremental sale. The reason I treat QUALCOMM's Research and Development budgets differently is that we are talking quantum leaps in benefits to subscribers and the creation of huge consumer surpluses which are what drive rapid and profitable market development, market share and profits. QUALCOMM is building a wireless world, which is of vast value to people. To get people around the world to buy into it, they spend maybe $100 million on radioOne [I doubt it was anything like that much], which cuts the bill of materials and space taken up in the phone by half. That makes their ASICs and licensees' phones much more attractive than those without radioOne. Throw in gpsOne, BREW and other goodies and subscribers can get a huge bang for their buck. Competitors can't get close to it. So, $400 million generates sales to 1 billion people with $10 profit. People buy new phones every 2 years. So that is a LOT of profit for not much spending on new inventions by QUALCOMM. A coffee machine for a British Standard salesman doesn't get such a good bang for the buck. As time goes on [decades] the return on investment on new inventions will decrease, as it has for the fuels industry. But for now, inventions in telecosmic cyberspace are super valuable [if they are the right one and marketed well - Globalstar is a good case study of a good idea destroyed; there was not much return on that invention for shareholders]. Mqurice