John, it was getting late and my post long, [which usually doesn't stop me], and you have picked up the next step for me. Billions of thingies is the first step = size of market in physical terms. But without the value of those billions, it's meaningless. Is there a monopoly wide enough, lasting long enough, and valuable enough so that the buyers will flood QUALCOMM in piles of money?
We don't even need to guess at the value people put on the stuff. Well, not as much of a guess as we had to make a few years ago. While it's true that profits paid from China are tricky [so far, but that'll be less of a problem in future as they continue to modernize], as I've pointed out before, a few times, QUALCOMM collects money for the ASICs and without an ASIC, there won't be a phone. Without paying the royalties, which are only about 2% in China, there won't be an ASIC. So the idea that China is some sort of financial black hole is false.
China is part of the modern world now. Vast trade is providing their standard of living. It's easy to stop trade with China [for the USA to do so anyway].
To avoid the need to add up the value of the widgets and all the stuff going on, we can cut to the chase and examine QUALCOMM's bottom line.
Even with billions of valuable widgets being sold, a company can pour it all down the drain with strategically disastrous investments. The behaviour of management is more important than the behaviour of billions of widget buyers, even if the widget buyers pay for a wide, long and powerful monopoly and they really, really want the widgets.
After looking at the bottom line, we need to add in BREW, Globalstar and other stuff which is still brewing in the kitchen. Some, such as WirelessKnowledge, Wingblast and Vesper were less than perfect investments. Graviton entered a black hole too. 724 Solutions turned turgid. But that was in the irrationally exuberant pre Y2K days when everything was possible, and soon.
Everything is still possible, but it'll actually take some work, investment, time.
As qveauriche says, we also need to add in residual value of the company when calculating our return on investment.
The bottom line, excluding pro forma strategic disinvestments, has shown an enormous propensity for umpty million people to buy CDMA and over quite a few years, in competition with entrenched, mature GSM, TDMA, analogue, PHS and other technology. CDMA is winning! Most are eyeing WCDMA and CDMA2000 as the way to the future. Those millions are paying a good price to gain the advantages of CDMA. Competition is not eroding the margins. Even without 1xEV-DO, people are prepared to pay quite a bit to get CDMA.
So, with 6 billion people wanting the CDMA widgets and 2 billion of them able and willing to pay the price by 2010 we have quite a growth prospect.
Then, get the bottom line and draw a curve out to 2010 using the growth rate of the past 3 or 4 years. That growth rate will increase as WCDMA comes on stream and as CDMA2000 1xEV-DO takes off, generating a lot of upgrades to the latest models [just as the car industry for decades brought out new, improved models, with shinier bumpers and tail fins, causing people to trade in for the latest and greatest, even if the differences were minor] but ignore that lumpiness.
Watch young people around the world with cellphones. It's the craziest cultural craze since the hula hoop, but longer lasting. This one plugs straight into our brains and social framework. It's more powerful than booze and more addictive than baccy. It's cheaper than either for enthusiasts [or even the casual user]. This is not a passing fad. It's a fundamental change in the human landscape around the world. More fundamental than the car, which merely replaced our legs. This is plugging straight into our minds; our defining function.
So far, for nearly everyone, cellphones have merely enabled talking anywhere, which most people around the world have got used to over a century, although they've had to ask if they could use the phone sometimes, or find a phone box. Even that advantage got people going in a big way. The next phase is going to turbocharge demand. Hints of it have already shown up with digital cameras built in, games and stuff. That's just the beginning.
Of course, the key is cost. CDMA can provide mobile cyberspace at less than 2c a megabyte and as you say, Moore's Law is going to crunch that down a long way, not to mention old-fashioned mass production, unit costs and economies of scale. Indians will be able to afford to use it, even if they don't get the large pay increases heading their way [listen to software developers whine in the USA as jobs are outsourced to India, flooding the country with money which they haven't seen since they kicked the Poms out half a century ago].
Anyway, I'll go and draw my graph of the bottom line over the last 4 years [with strategic boondoggles excluded] and see where it crosses 2010. I'll include residual value in my rate of return. If you have such a handy graph, how about popping it in the stream for all to see.
Thanks,
Mqurice. |
