Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: JMD who wrote (8105)	2/6/1998 8:18:00 PM
From: dougjn	Read Replies (2) \| Respond to of 152472

I submit, my dear Mike, that you are not being fair as to the degree to which I bashed Q's management. As in, I didn't, really. I said they were a bit naive. They took what the Koreans said at face value, more or less. The real problem was the degree to which their net net depends still on Korean sell through of Qcom Asics. I had no idea that Korea could at this point (which I belive is hardly their bottom) take projected March Q earnings down from north of .50, to about the same as last year, which was .23. Only Qcom management knew just how great their net profit exposure to Korea is. For the last two conf. calls at least, Q management has refused to answer all questions getting at margins in individual business segments. Knowing the magnitude of their net net exposure, unlike certainly myself and I believe all the analysts, they should have acknowledged, at a minimum, that there was greater risk to future expected earnings than previously though, as a result of Korea. I also think they should have actually have guided down. Let me put it this way. I have no doubt that both Ramsey Su and myself would have done so, had we been fully aware of the profit impact of significant Korean slow down in Asic purchases, phone deliveries. (And as it was, I was pretty much bearish on the Q near term, anyway.) And yes, I do think Q's management is stronger on Engineering than finance and certainly than RealPolitic/Economic. I have seen absolutely nothing to cause me to doubt their integrity. Doug

To: JMD who wrote (8105)	2/7/1998 11:12:00 AM
From: Carter Patterson	Read Replies (2) \| Respond to of 152472

I agree with you regarding the Q phone. Porsche cars are very nice, but how many do you see on the streets ? The reason is simple: PRICE. $500 for a phone is outrageous unless you are a high flying executive who wants a pocket phone and could'nt care about price as his company pays for it. The consumer still shops for service based on rate plans and in most cases cannot see spending more than $150 on a phone, which is plenty already. Phones will never be cars, which still have emotional appeal to many people. Although not CDMA, phones which are slightly bigger than cigars sell for peanuts all over the streets of Tokyo. People clearly want tiny phones, but not at $500. QCOM has to work like the devil on reducing costs (I think Grove from Intel said this). This is a function of volume and smart production/assembly. With the PCS Q overbuilt situation, QCOM may want to stimulate/flood the market with significant Q rebates. This will get volume up and maybe reduce overhead absorption per unit. As prices will inevitably fall; QCOM may want to take this opportunity and deal with it now. Longer term, I like QCOM as they are the " keeper of the treasure chest - intellectual property", rather than manufacturers of phones. I would not be surprised to eventually see them sell off their phone manufacturing operations to a typical consumer electronics company like Sony or another Japanese company. At that point, they will have used their manufacturing to stimulate the market acceptance of CDMA and really learn the practical problems inherent in ASICS design, battery issues, etc. Then they can focus on R&D and live on royalties. The analyst world is fixated on short term profits from manufacturing and S. Korea in particular. Anyone who has bought the stock for current earnings based on one market is stupid. QCOM's story is getting royalties from all over the world. However, they have been lucky to some extent that one market has been as profitable. My advice, forget S. Korea. Focus on other Asian countries and the rest of the world. In particular - the infrastructure build outs by Motorola, Northern Tel, Lucent etc are far more important to the longer term. I am anxiously awaiting a decent Motorola CDMA phone at $100 or less. This will stimulate the market big time as Motorola is known to Joe Public whereas QCOM is not. How about 5% on millions vs $100 on thousands ? With the 10c a minute pricing plans, I see massive analog to digital switching, as long as there are $25 plans. The pinhead analysts have a difficult time valuing companies at this stage. The key is continued acceptance and expansion of CDMA as a standard for voice and future wideband applications. QCOM could really help by articulating their estimates of CDMA rollouts, subscribers, royalty rates, R&D to enable analysts to develop a longer term royalty model. In my opinion, if they cannot live nicely on royalties in 5 years, why are we here ?

To: JMD who wrote (8105)	2/7/1998 11:22:00 AM
From: Greg B.	Read Replies (1) \| Respond to of 152472

Mike, This thread effectively disagreed with their Q demand forecast weeks ago, citing that the general consumer would not be willing to pay $500 for a phone. Now they have a "large" amount of Q phone inventory (not just for Korea). CC also revealed that they recognized their mistake, and had already implemented their cost containment plans, changed their marketing strategy, and were waiting for the "SEA excuse" to lay off 700 temporary workers and shift manufacturing to QPE in response to "unexpectly soft" market demand for Q phone, "unexpectedly large" demand for lower cost QCP-2700 phones, and the threat of new lower cost phones exported from SEA. While the earnings shortfall is impacted by Korea, "the softened" Q phone demand, IMO, is also factored somewhat significantly into earnings shortfall. That might also explain the surprise over Korea's impact to profitability. If QCOM can sell 100,000 Q handset and clear $150 each - that's $15,000,000 added to the bottom line. However, demand for the Q phone is still there among target consumer groups, but the marketing/sales group are not effectively creating awareness. These consumers will buy, but they have yet to hear/see a compelling case for the sale. Can't make it Tuesday, but would be curious to hear how they respond to gentle probing: How many years did top marketing/sales folks spend working with other manufacturers? How is broker/sales network structured? How did they arrive at their original demand forecast for Q phone?

To: JMD who wrote (8105)	2/7/1998 1:49:00 PM
From: DTA	Read Replies (3) \| Respond to of 152472

Agree that Q needs to get into Europe yesterday. Seems like the recent about-face reveals a little confusion over the core business, the requirements implied for sustaining a long-term enterprise, and the routes chosen to achieve some vaguely defined end states. Seems to me (first-posting holder of a 1000 long) that the Q needs to get CDMA established generally everywhere (except maybe east jesus) before it depends on selling a $500 single-mode phone anywhere. CDMAone is a superior piece of engineering; a $500 phone is, at least to this nonmarketing type, a questionable strategic vision. CDMA, then ASICs for CDMA, then phones with ASICs for CDMA. Asia, North, Central and South America, Europe, and then the developing world. My guess is that it will languish in the 40s, and 3 years from now will be 5 times that. Regards, Duane Anderson

To: JMD who wrote (8105)	2/7/1998 3:38:00 PM
From: PAL	Respond to of 152472

Mike, you hit the nail right on the head about Q phone costing $ 500. I have been using cell phones for many years, ranging fronm Mitsubishi Transportable, to Motorolla bulky handheld to Motorolla flip phone and now Qualcomm 800 dual mode. I will be changing again for sure. While I paid over $ 1000 for the first phone, the price kept dropping, and with the one or two year contract the hardware is practically given away. My last phone I paid for around $ 170 during promotion where they give you credit if you bring ANY phone working or not, or even toy phone (I was going to give them a banana and told them it is my son's toy phone but they rejected it, so I had to find a broken phone to trade). Although I hold a substantial number of shares in QCOM, I am not going to pay $ 500 for a Q phone.

To: JMD who wrote (8105)	2/8/1998 3:45:00 AM
From: Asterisk	Respond to of 152472

As I mentioned before I was with a company that had to get FCC approval for a cordless (not cellular) phone. When we were going through the process we had to go to an independent lab first to get some testing done. They submitted a 3-4'' report (seriously) to the FCC. After that you had to send a sample phone to the FCC for them to photograph. Then they had their own lab do some tests if they had any questions. Then it got passed on for final approval. It is a long and very involved process (usually months). And if at any one of the steps someone gets a notion to they can stop you dead in your tracks. The other thing is that once you submit your data package to the FCC it is entirely possible that if you change any of the major parts on your phone(as any engineer knows, this happens all the time) you will have to go back to square one.