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

To: David E. Taylor who wrote (119210)	5/23/2002 7:45:47 AM
From: arun gera	Read Replies (1) \| Respond to of 152472

>While they may have wasted some of that R&D expenditure on dead end products, overall they've generated about $8 of revenues (whether profitable or not) for each $1 sunk into R&D.> David. Look at it another way. That R&D has been used by hundreds of other vendors to make all kinds of products. Qualcomm has been seeding the whole wirless industry with its R&D. Arun

To: David E. Taylor who wrote (119210)	5/23/2002 5:05:58 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

Grocery stores? well, i was being tongue in cheek as i hope you know. but sometimes hyperbole can be helpful in making a point--in this case, that i don't really buy the line about $X R&D producing $9X in sales. because, for example, today's sales dollars are much smaller than they were in 1998, when QCOM was trading at 1x sales. and those dollars were larger because they included expensive, low-margin infrastructure equipment. this equipment with its low margin but large volume presumably contributed a lot to the gross revenues but reflected little in the way of profits. i have never heard of anybody using revenues as a multiple of R&D as a metric with any particular meaning. presumably because one must consider the type of business model a co has (is it high volume/low profit, or low volume/high profit?) amongst other things. and in QCOM's case, i think it's especially tricky since their revenue mix has changed considerably over the past 5 yrs. still, obviously their R&D which has given them the CDMA IPR monopoly rents was a very good investment. but this gets back to my point about the ex ante outlook for the payback from ongoing R&D efforts... you could even argue that the $18.4 billion of revenues to date has been derived mostly from the products of around $1.3 billion worth of R&D, and at the same ratio, we could maybe expect $14+ billion of revenues over the next 3 years with all due respect, i just don't think one can extrapolate like this (realistically). and what really matters is not the gross revenues generated "from" R&D, but rather the return on investment. which gets back to my point about adding up everything QCOM has ever done with all the money it's ever received, and seeing what the return on all that money has been. which is where retained earnings come into play. and which is why i continue to think CDs pay a handsome rate of interest by comparison! although one does hear people (mainly Japan-loving academics) talk about R&D as a percentage of gross revenues as a measure of a company's (or country's) attractiveness. this argument was used a lot back in the late 80s by Japan-lovers because they spent way more on basic R&D than we do. one doesn't hear that argument so much these days.