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

To: JMD who wrote (11909)	6/30/1998 10:35:00 PM
From: Gregg Powers	Read Replies (4) \| Respond to of 152472

Mike: Let's not get confused :-). JGoren's Q is the 1900mhz (single mode, PCS) variety and the new Q800 is a dual mode (cellular @800mhz and analog) phone. While the Q800 will ramp up in July, the Q1900, with new plastics, will ship in September (but it is my understanding that the latter will remain a single-mode affair). I, for one, find the market's reaction to the Cabi "hit piece" to be rather interesting. Over the years I have watched "bear raids" like his recent report send QC's stock into a tail spin for weeks. But this time out, all Cabi got for his efforts was a one day blip followed by an immediate recovery. How do I interpret this? Well, it seems to me that little-by-little the market is beginning to understand the Qualcomm story. "Bad news" is being placed in appropriate context, while the company's considerable progress is being more clearly recognized. Within this context, BT Alex Brown's upgrade is interesting. Brian Modoff had previously been very circumspect about QC due to the company's Korean exposure and, of equal importance, nobody can rightly accuse him of being a cheerleader. Having just read his report, I feel he has a good handle on most of the salient issues and he should be commended for getting ahead of the curve (i.e. not waiting for everything to be spoonfed during the July 21st conference call). Qualcomm investors have certainly had their faith tested. First the Koreans go and tube their currency (just to reduce the royalties payable to QC it would seem) and then the company manages to FUBAR its handset production. Living it day-to-day we seemed to have suffered an eternity of problems. And given the concomitant frustration, it is easily to forget just how powerful Qualcomm is as an investment story. CDMA has been deployed in over thirty countries and is clearly becoming the dominant North American digital standard. Proud Ericsson, sponsor of TDMA-based GSM, is scrambling to protect its turf with a bastardized 3G CDMA-based standard that will inevitably necessitate it to license QC's IPR. Ironically, the royalty stream which the bears once claimed would prove "insignificant" is now claimed (by the same bears) to be so large as to be anti-competitive. Meanwhile, QC's ASIC franchise is extremely strong, growing rapidly and highly profitable. The infrastructure business is reaching critical mass and should be bolstered materially by a huge Mexican deployment (look for the contract announcement next week). While Wall Street rarely talks about it, the Globalstar business in-and-of-itself would make for a highly attractive operation. Globalstar contract development, gateway infrastructure and a long-tailed annuity from handset & terminals should easily aggregate to $450mm in revenue in 1999 alone. Yeah, the handset operation has struggled, by this will prove to be a bump in the road, rather than a brick wall. Remember, Irwin & Company figured out how to commercialize a technology that everybody else had given up upon (citing impossible complexity)--do you really believe that these same people are incapable of building a plastic phone that doesn't crack? I have repeatedly argued that there was an enormous disconnect between Qualcomm's internal realities and Wall Street's external perceptions. I suspect that as the company's earnings power becomes visible over the next six months other analysts will join Brian Modoff in the "bull camp". It should be fun for a change. Best Regards, Gregg