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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: engineer who wrote (31081)	1/13/2003 7:29:39 AM
From: kech	Read Replies (1) \| Respond to of 196564

of couse all these companies who fared thru this big recession with out having debt and without declaring bankruptcy (thus rendering the shareholders value as ZERO), could have paid all the retained cash out in divdends and been a victim to the effects of a major downturn. That is exactly the point - dividends can be cancelled and debt can't. This plan is about favoring equity financing rather than debt financing. The way they do that is with tax free treatment of dividends, but they also have a way to treat investment, in things like Reliance, from capital that could have been paid out. This raises the basis cost of equity shareholders. Hence, if Q invests in Reliance, our basis goes up. The caveat is that they had to make this investment from capital that is after tax. If not, no increase in our basis. I do not think it is bad thing for them to retain cash to make major moves. You are preaching to the choir here. I haven't been critical of Q on these investments nor do I suspect Qualcomm management of excess managerial perogatives -- except maybe with respect to payment of options. However, the general perspective is that managers have let down the economy in the last couple of years and either invested too much in the late 90's or paid themselves too much, or have done any number of other nefarious actions like accounting fraud. One way to deal with this, and it is very anti-management in its approach, is to give more incentives to give the money back to shareholders or provide incentives to do so. If the shareholders like what the company is doing they can send it back again. Folks like John Shannon can hang on to it. As far as Q goes a penny dividend, (and basis increasing investments from things like Reliance) wouldn't hurt it any, and would serve as a reminder that the money belongs to the shareholders and isn't a play thing to pursue endless Jihads of CDMA promotion. (Though I believe essentially all have been justified to date - some day they should taper to a close and investments should be justified on a narrower return on investment perspective.)