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

To: Jim Mullens who wrote (125741)	12/1/2002 8:47:19 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 152472

Happy Thanksgiving to you. Belatedly. Why do I look out 15 years Jim? Simple: 'cause I know how to make money buying shares: sell them to someone else. So when I buy something, I like to think about what the person I sell them to will be thinking. And as a long-term guy, I plan to sell things in the 5-10 year time frame. This way I avoid buying stuff that sizzles like the fuse on a firecracker and then goes boom while I'm holding it. Might be too much to ask of you to pause in your hard-wired disposition to diss anyone who doesn't think Qualcomm's such a great investment. But please try, 'cause there's method in my madness. Don't you think whoever buys QCOM in 2012 is going to be planning to make a profit too? Won't they be planning on selling it later and basing the buy price on what that ultimate sales price will look like? So isn't one's expected profit on a purchase today depends on giving someone an expected profit to look at, say 5-10 years further themselves? Which would make 15 years a reasonable glimpsing point for a rational investor. Alternately you could rely on finding buyers with little more than a cheap calculator and no brains doing some quick but unintelligent math. I've been operating under the assumption that's not a reliable way to make profits in the market. But you're adding weight to the evidence that I might want to rethink this position <ggg> Which brings us to your very astute point about my low-balling the number of qualcomm thingies being shipped in a six month period today. Here I was making the point that expecting 22x growth from a base of 15 million subscriber adds per six months meant QCOM buyers are betting on 300 million subscriber adds per six months. And I figured that was gonna be a lot of cellphones. Maybe you are right after all and I am wrong. Maybe I should have been thinking that the business tracks adds plus churn. I guess I should have been way more precise and used 22x growth on 42.5 million handsets bein' sold every six months.... 22 X 42.5 M... What's that work out to Jim, 924 Million? Almost a Billion handsets every six months? Maybe I am off by a factor two either way (incorporating feedback from others). That still makes somewhere between a billion and four billion handsets a year being sold on a sustainable basis. Have you ever paused to consider what subscriber penetration it would take to drive that kind of volume? Take a moment Jim: how does this compare to the planetary population? Or the penetration of flush toilets? Running water? Electricity? And how does $29.95 per month compare to the income of the least wealthy 20% of the necessary subscriber base? In such a rush to find out what's wrong with what I write, you apparently don't spend much time thinking through the implications of contrary conclusions. Seems you're the dude reading without understanding what is meant by what is being said (isn't that the definition of "comprehension"?). Someone doing that while lecturin' about comprehension... takes balls, but not a lot of brains. Definitely what it takes to swallow a story hook, line and sinker. Yup, it's easy to throw around numbers and compound annual growth rates that get you to 900 million handset sales in 2007. Any moron with a calculator can crunch numbers. It's another matter to ask whether the results follow from reasonable assumptions and represent reasonable outcomes, and what kind of numbers follow reasonably thereafter. With your scenario that gave possible volumes of 700 million phones in 2007, did you bother modelling 2008, 2009 and 2010? Or compare your volumes with global handset sales? What happens to the stranded manufacturing capacity of non-CDMA cellphones, and how will that affect ASP? Anything can happen Jim, the hard part isn't coming up with a variety of potential scenarios. The hard part is figuring out how reality tends to intrude on theory. And generally things don't turn out to be as favorable as the cheerleaders would have us believe. Sooner or later the problem with hyper-growth is that it turns into mere growth. Or, more often, a gigantic buildup of overcapacity that leads to a big bust. The same sort of thing that keeps the bacteria on your teeth from colonizing the entire planet in a month or so. You are describing the same thought processes trapped a lot of "savvy" investors back in the telecom investment hyper growth bubble. And will trap a lot of others in hyper growths yet to come. Apparently some folks need to be burned more than once before they look twice at PEG as a valuation metric or recognize skepticism as a survival skill. Based on what is being written, I suspect we will see a short term bubble that will loft QCOM back up to crazy heights again by a very similar process as it did before. There is no shortage of folks with more money than brains who think nothing of simply extrapolating 1.5 to the 5'th power and using this as a basis for counting evanescent dollars... as though they're a foregone conclusion. Feel free to participate, but don't kid yourself that it's an analytical process based on sound economic fundamentals. As far as this: One final word, instead of fixating on GAAP, pro forma, the past, etc., why not remove the mental block and look toward the future as it just might brighten your outlook on life. Well, that is such a juvenile comment, I am sure it will not be your final word. Just because I don't think QCOM is a good investment at these prices I have a gloomy outlook on life? LOL... yet another naive extrapolation. At least you are consistent. John