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

To: gdichaz who wrote (119104)	5/22/2002 9:22:56 AM
From: Wyätt Gwyön	Read Replies (4) \| Respond to of 152472

The core strength of Qualcomm is the sucess of its R&D and its intellectual property. i half-agree: i would say QCOM's core strength is its ability to charge monopoly rents on CDMA IPR. that is the ONLY reason i find the company halfway interesting as an investment prospect (at the right price). going forward, imho its R&D efforts cannot be expected to return more than their cost of capital, so i would not call that a core strength. as an example, QCOM invested huge amounts in GlobalStar, but look what happened there. also, QCOM flushed hundreds of millions down the toilet with its investments in carriers in countries where you can't drink the water. currently, QCOM is investing in R&D to develop BREW, which is obviously an attempt to turn monopoly rents in the (presumably emerging) mobile application platform market. looking at the ridiculous prices QCOM wants to charge, it is not surprising that some major players in the industry, such as Sprint and NOK, are not rushing to make QCOM the next MSFT with BREW. (coincidentally, NOK and MSFT are also making large investments in the mobile software platform area, which indicates to me that nobody will turn monopoly rents there. indeed, NOK is now "underselling" [as one competitor put it] its software "crown jewels" to competitors at cheap prices in order to reduce the MSFT threat. in such an environment, i find QCOM's BREW strategy most laughable, and it does not surprise me that it is headed by the company's "fortunate son". long live NEPOTISM!) time will tell, but i expect in the end their efforts with BREW (and elsewhere) will not return more than what they invested (if that much). more broadly, if you add up all their R&D subsequent to the CDMA "goldmine", plus all their investment boondoggles, i bet they would've done better investing in Treasurys. this is most clearly seen by the fact that their retained earnings, compared to total paid-in capital, are perhaps less than they could have gotten from a checking account. that's not really a knock on QCOM's management (well, it is, but...); it just shows that the world is normally a tough place to turn a buck. the best situation is to have monopoly rents like QCOM has on CDMA IPR or MSFT has on Windows. unfortunately, when these cos try to expand their territory (like MSFT with the Xbox or QCOM with anything besides its original CDMA), it does not take long before they start wasting money. the sad thing is, cos like QCOM and MSFT can be a bit arrogant because of their early success in establishing monopoly rents (with CDMA IPR and with Windows OS/Office), so they get cocky and think they can do it again. to make matters worse, they have the RESOURCES to waste a LOT of money on stupid R&D projects. hence MSFT is wasting BILLIONS on the X-box, and we all know where QCOM has pissed a lot of funds away. basically, there is no reason to think these cos can establish new monopolies out of their core areas. so what they should do, instead of WASTING tons of cash on R&D boondoggles, is to return cash to shareholders. yeah, i know it's a crazy idea to think that a shareholder would ever want cash back from a company... all just my humble opinion, and i could be completely wrong...