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

To: pyslent who wrote (126134)	12/21/2002 6:12:10 PM
From: kech	Respond to of 152472

The argument that that number should be added to the balance sheet really flies in the face of conservative accounting, IMO. I think what Jim is saying is that if they bought these patents from another company (like they bought Snaptrack patents by buying Snaptrack) they would be on the balance sheet and depreciated over time as good will (since the company they bought was no doubt valued at more than its book value). Since they developed them internally, the costs have been expensed rather than capitalized and are not on the balance sheet. The point is that if one wants to value Qualcomm on the basis of its book value, the book value is way too low since it doesn't include the value of these patents' value. The metric of book value would be much more useful if indeed Qualcom did buy these patents from someone else. Then the book value would be a more reasonable proxy of the true value of Qualcomm.

To: pyslent who wrote (126134)	12/21/2002 6:25:28 PM
From: Jim Mullens	Read Replies (1) \| Respond to of 152472

Plysent- Thanks for your “try”. You wrote- 1. "QCOM's intellectual properties are what allow QTL to do business and generate profits." You’re right, Qualcomm’s IPR is the basis for some/much of both QTL and QCT profits. Those profits in the form of EPS times a PE multiple generate a stock price (value). However, in the current general market environment (IMO), the market is not realistically pricing a premiere growth company such as Qualcomm with normal market metrics. “Analysts” today are being extremely cautious in estimating long term growth rates are therefore using low multiples (PEs) and setting low targets. As such, Qualcomm’s current valuation is based on its current EPS and for the most part the extremely high value of its IPR in not entering into the equation. As Jon so aptly stated->> “IF Qualcomm decided to sell their entire IPR (intellectual property rights) holdings to another company today, then Qualcomm would probably "book" a gain of something on the order of tens of billions of dollars. They would immediately lose about 1/3 of it in U.S. corporate income taxes, possibly have no business future, BUT ... would be able to make the Qualcomm balance sheet have a nice high book value. <<< 2. “The argument that that number should be added to the balance sheet really flies in the face of conservative accounting, IMO. My prior request of Huey- “Huey, as a advocate for “informing the investor” of the “economic value” of the granting of employee options by including such as an expense on the income statement, why don’t you also take up the cause ( in the name of “informing the investor”) to include the “economic value” of patents on the balance sheet? “, is in the interest of one of the basic tenants of accounting- that of CONSISTENCY in accounting treatment. Being CONSISTENT in advocating for investor awareness of the “economic value”of all transactions undertaken by a company should be applied equally. Some want investors to be informed of the “economic value” of stock options as an expense item on the income statement (when no out of pocket costs are incurred by the company for doing such—incurred only when buying back stock to do such), YET AREN”T CONCERNED with informing the investor of the future ”economic value” (benefit) to the company for providing those options. For CONSISTENCY, investors should be informed of the “economic value” of both sides of that transaction. I would think that in the pursuit of CONSISTENCY, the accounting profession should be concerned with informing the investor of the “economic value” of the patents held by the company as they may certainly be one of the companies most valuable assets, especially so in Qualcomm’s case. Why then, does the accounting profession not advocate that the value of patents appear as an asset item on the balance sheet? Hope this helps- Jim