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: Clarksterh who wrote (12757)	7/22/1998 2:01:00 PM
From: Gregg Powers	Read Replies (2) \| Respond to of 152472

Clark: You always ask good questions...so please don't be reticent. Recall that QPE is a joint-venture between Sony and Qualcomm that is controlled by QC and consolidated into the financial statements. In English, imagine a situation where you and I are 50-50 partners in a manufacturing business that produces either Widget A (which I market around the world) or Widget B (which you market around the world). Remember that Widget A and Widget B are related, but not identical. Add into this equation the fact that I like to spend more on R&D then you, while you prefer less technically-oriented points of differentiation. Because of these and other subtle differences, our partnership tends not to be exactly 50-50 when it comes time to allocate expenses...my R&D bill is higher, your product development budget is higher (and maybe, because you offer more versions of Widget B than I do, your warranty expense is greater). But, to complicate the matter, we share lots of personnel and other assets, and as a result, the scorekeeping keeps getting more and more complicated. Eventually you and I decide that the structure is too cumbersome and the best solution is to restructure the relationship so that our JV only manufacturers the end product. You and I are now individually responsible for all other expenses (external to the manufacturing JV) related to design, R&D, warranty expense and product marketing. While something of an oversimplification, this is what transpired between Sony and Qualcomm. This financial restructuring is happening "on the fly" (i.e. while QPE is struggling to produce as many phones as possible, ramp the Q800, and support new Sony products etc.), so it is difficult (if not impossible) to transform the entire relationship all at once. Factor in a simultaneous manufacturing and operational restructuring, coupled with the much discussed product quality issues, and it is not surprising that we have had a couple of quarters of adjustments. Hope this helps. Best regards, Gregg