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

To: Wyätt Gwyön who wrote (128621)	5/5/2003 3:23:55 PM
From: mozek	Respond to of 152472

As an ex-insider at a large corporation, I can talk about what I've experienced in my own sale rationale, which may be relevant. Typically, I would time my sales as a combination of two things, planned sale within some time window, regardless of price in most cases, and a minimal amount of market timing of my own. Of course, the market timing was only whether or not I believed the market should more highly value shares in one quarter or another based on our long term progress since I always had to respect selling windows or knowledge of any material, short term information. Many people didn't try to time in that manner at all. As a result, I would sometimes misjudge how the market would react to progress that I knew we were making (not valuing at highly as I believed they would) and end up selling at a lower price than I could have received. Often, I would get a somewhat higher price. In the past couple years, I probably would have done better with no attempt to time at all just due to general market conditions. It seems reasonable to me that executives at Qualcomm could have expected the market to value their current progress much more than has happened. I certainly did. As a result, they may have been waiting until they soundly beat and raised expectations by executing very well in most areas. They have done that, and the market is now valuing them in a manner that seems to defy conventional wisdom. At that point, they may not have much reason to wait for any planned sale that they had previously postponed. Obviously, my speculation is no more valid than any other, but this is behavior that would not surprise me. Comments appreciated. Mike

To: Wyätt Gwyön who wrote (128621)	5/5/2003 6:43:05 PM
From: Whatnot	Read Replies (1) \| Respond to of 152472

Interesting update on Warren Buffet. I read today that his seven person board includes his wife and his son. He is now going to increase the size of his board to comply with recent regulations. I recall the Jacobs family getting maligned on this thread because of a suspicion of nepotism with two sons employed at senior management level. At the same time, Buffet has been held up here as a shinning example of corporate governance. I wonder how many times his wife and son have opposed his board recommendations? Not very many I suspect. On a side note, it was interesting to read his comments regarding many of George Bush's policies. Buffet was quite critical of his tax plan and his plan to privatize social security.

To: Wyätt Gwyön who wrote (128621)	5/8/2003 12:32:12 PM
From: qveauriche	Read Replies (3) \| Respond to of 152472

Hey Darfot. Hope you're doing well. As my earlier post indicated, I am concerned by the insider selling. But I would be alot less concerned if there was at least a touch of insider buying.I can't think of a single reassuring reason as to why there is such a sharp contrast between the optimistic appraisals of the company's future in quarterly conference calls and the complete absence of even a single insider backing up that belief with his/her own money. The last time I saw such a sharp contrast between mgmt.'s words and actions was Gary Winnick's now-infamous collar deal. Still, I remain persuaded for the moment to hold on. Shorn of all of its detailed reasoning, I understand the primary complaint you and John have about QCOM is the valuation, and an insistence that such a consideration must be made on the basis of the GAAP # and not the operating number. The most recent "concern" is that CDMA chip competitors are coming out of the woodwork.QCOM will no longer enjoy its near monopoly pricing power. CDMA growth will slow because of inventory buildup in Asia, and QCOM will enjoy only a shrinking share of a stagnant market, and the stock therefore faces a structural multiple compression which will make either difficult or impossible to sustain a price in the low 30s, and eliminate any possibility of a positive return that would warrant the downside risk. In short, this is a "Greater Risk, Lower Return" stock. With respect to these concerns, I'd like your feedback on the following points, which mostly have already been made on this forum. 1 The capital commitments being made by major, heavy hitters to enter the CDMA chip market is, you must agree, at least a validation that did not previously exist ofCDMA 2000's place in the future of wireless. We can discuss the impact these competitors may have on operating earnings below. For now, the only point I wish to make is that there can be no clearer indication that QSI has served its purpose, and will be increasingly irrelevant to the GAAP number. The operating number therefore is a more accurate predictor of the GAAP numbers to come. 2. The other point that's often overlooked in all the table-pounding over GAAP is that QCOM's policy is to recognize unrealized losses through writedowns, but not unrealized gains. To the extent that the sudden emergence of several big-name chip competitors bolsters the probabilty that CDMA growth lies ahead, then the value of QCOM's patent portfolio must be seen as having risen as well. This "unrealized gain" appears nowhere in the GAAP number. To the extent that the writedowns have any significance at all, it would appear that ,dollar for dollar, the assets increasing in value are every bit as important to a determination of an overall value for the company. 3. The QSI writedowns have been cash-neutral for the most part, and the operating number therefore is already more relevant in determining the free cash flow of the company. The quarterly additions to the cash number are themselves indicators that QCOM has already significantly scaled back QSI investments. 4. I heard a money manager say the other day that the value of the real estate that Home Depot's stores sit on is greater than the market cap of the company. At present QCOM is sitting on $6.00 per share of cash with almost no debt. Its a number thats bound to grow over time, perhaps dramatically. Thats not so bad for a stock thats trading in the low 30s.In fact, wouldn't it be more accurate to calculate QCOM's p/e ratio as being a multiple of the stock price LESS cash per share. Cash is cash. Dollar for dollar. It's made already and net of corporate taxes. What we really need to look at is the what we're paying for the operating business itself. Which is only about $25 per share. 5. As to the impact of competition on QCOM's growth rate, no one seems to have much confidence in the value of QCOM's CDMA intellectual capital, which should enable QCOM to remain far and away the market leader in the growing CDMA market. 6. Absolutely ignored in the hue and cry over the new CDMA competitors is the bottom line growth to QCOM from entering the GSM market, where it will apparently be the first to market with multimode chips that will straddle the chasm between GSM and what is alleged to be its 3G evolution WCDMA, as well as 1X. 7. Also ignored is any consideration of growth in the worldwide mobile wireless market over the coming years. The size and extent of this growth will depend primarily, I think, on the rate at which poor countries with low teledensity opt for the buildout of wireless as opposed to(and not just in addition to) more expensive landline systems. I think it will also turn on how many applications will be developed to take advantage of the data rates made possible by 1x ev-do and WCDMA, and the extent to which they are more suited to a multiplicity of devices as opposed to being crammed in a cellphone or a PDA. 8.If you have a stock trading around 31 which has trailing earnings of $1.58 (again this assumes the operating number is more predictive of future GAAP numbers than the current GAAP number), has an unassailable patent portfolio in the technology to be deployed for almost all of the world's 3g systems, and has a commanding technological lead in that technology, and therefore faces a tremendous growth in its addressable market even if it has more competition in the market, and currently has $6 a share in cash, I just don't get where the doom and gloom is on the excessive vauation of this stock. 8. Finally, call me a nut case conspiracy theorist but I grow only more bemused over time with the reasons critics who have consistently been wrong about QCOM and CDMA come up with to hate the stock. The litany of disproven doubts have been well-chronicled on this board, but the last three broad themes (a. QCOM has no, or less, IPR in WCDMA-wrong. b. WCDMA will swallow 1X whole, and the Europeans will lock up all the WCDMA contracts-wrong c.CDMA 1X is going to be a major player in 3g, but wait, that's still bad news for QCOM because they now have competition- ????) are so internally inconsistent that the picture emerges of a group of people determined to find rain on a sunny day. Sorry for the length, but at the end of the day I think you and John are looking at the growth required to justify the price at the current GAAP earnings rate, which in the case of QCOM is clearly not as relevant to the future as would ordinarily be the case. When you make the reasonable assumption that the gap between the operating number and GAAP will close, and in fact that there will be quarters when GAAP may be higher than the operating number, this is not an expensive company. Best Regards.