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

To: voop who wrote (54181)	8/4/2006 2:19:32 PM
From: Art Bechhoefer	Respond to of 197246

a fabless chip manufacturer loses control of his destiny without having control of the fab A company like QUALCOMM doesn't need its own fabs, particularly if it knows its expertise is elsewhere. You do what you do best, and that doesn't mean trying to do everything. When QCOM was just getting started manufacturing its own handsets, it still operated a facility jointly with Sony, which had all kinds of experience manufacturing everything from chips to cases for equipment. Although Sony could be described as a very knowledgeable manufacturing partner, the enterprise didn't do all that well and served mainly as a vehicle for getting CDMA handsets into the marketplace. From a management point of view, it is smart to let a company like QUALCOMM concentrate on chip designs, rather than spread its energy into areas that are more efficiently handled by specialty companies. I recall many years ago a NASDAQ traded company known as Cherry decided to branch into chip making. The company was noted for making mechanical miniature switches, such as those used to raise and lower windows in cars. It was very good at this and made most of the miniature switches for the entire domestic auto industry. But then it decided to add semiconductor switches to its product line and spent several hundred million dollars on a plant that was too small to achieve economies of scale. Furthermore, the company had no manufacturing expertise at all in semiconductors. It dragged down profits to the point where shareholders were getting upset. Finally the company called it quits, disposing of its failed semiconductor operations, and even going private to avoid further criticism. QUALCOMM's decision to stay away from chip production is in its, and its shareholders best interest. Art