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

To: dougjn who wrote (12230)	7/12/1998 10:22:00 AM
From: Gregg Powers	Read Replies (2) \| Respond to of 152472

dougjn: Reasonable people can disagree, but I stand by my conclusion. First, terrestrial CDMA has been proven from the standpoint of the air interface and network architecture. While this suggests that Globalstar's deployment will ultimately be successful, I remember MOT's deployment difficulties in Los Angeles too vividly to discount the complexity and problems that can crop up with a new technology being deployed in a new (non-terrestrial) setting. The good news is that most of the CDMA "brainpower" is located in terrestrial gateways--this should help. But until the network is loaded and demonstrated under commercial circumstances, like it or not, you are undertaking venture capital technology risks. Second, Qualcomm's business model is complete: markets, products and customers. Globalstar's business model is still hypothetical. Sure, it looks fantastic on paper--but I have never seen a venture capital deal in my career where the promoters promised failure and financial destruction. How many customers will sign up? What will they pay? How many minutes of service will they consume? Right now you have pretty estimates on a spreadsheet as opposed to empirical evidence. Sure, the models look great...but always tends to be a gap between commercial concept and commercial product. Look no further than our precious Qualcomm. Two years ago, people paid well into the $60's for the concept of CDMA--the realities of commercialization have proven more time consuming and frustrating than expected back then. Such will probably occur with both Iridium and Globalstar. Said another way, right now investors can buy the sizzle without ever having tasted the steak. When "normal" problems occur during commercialization, and analysts start pulling down FY2001 EPS estimates because of this problem or that issue, then you will better understand my perspective. It's always possible that everything will go perfectly, but not probable... As far as your perception of QC's current manufacturing problems, I feel that you are actually reinforcing my point. QC has gotten so much right...CDMA deployed in almost forty countries (and as a North American standard), owner of the enabling IPR, a world class ASIC operation, the dominant handset vendor and an infrastructure business poised to achieve profitability...but pundits question the company's capabilities because a few thousand plastic cases crack and a vendor ships the company an out-of-spec connector (and this within the context of a handset operation that has ramped production from nothing two years ago to 1.5mm units per quarter). Pretty judgmental aren't we? The bloom came off the rose pretty quickly didn't it? Hell, QC's handset manufacturing problems have not even caused the company to miss Street earnings expectations, yet many are ready to hang management in effigy, label them incompetent and question the company's viability as a manufacturer. Jeez. What do you think will happen to Globalstar's pristine reputation if it signs up only 80% of some Street guru's expectation of first year subscriber count? Operating leverage works both ways...so you will have every knowitall bear on the Street talking about "the failed" satellite strategy and "the lack of consumer interest" and the "multi-billion dollar boondoggle". As I said before, I wish Globalstar well and I am certainly not wishing undue trials and tribulations on the enterprise or its shareholders. GSTRF's success will certainly accrue to QC, so my interests are parallel to yours. But I suspect the same investors who now trivialize the issues facing GSTRF will be calling for Bernie Schwartz's head on a pike when "something" goes bump in the night on the way to economic nirvana. Best regards, Gregg