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

To: Dave who wrote (17745)	11/4/1998 3:13:00 PM
From: bananawind	Read Replies (2) \| Respond to of 152472

OT Sorry, Dave, but like I said, you have misread the INTC situation. Intel has been lowering their ASP for decades as measured by the $cost per MIPS. Did it cause them to go broke? Hardly. Smaller line widths, better processes, and economies of scale allowed them to bring costs down continuously at about the same rate. Coupled with terrific execution for the most part, they came to dominate their industry. The short term flattening of profits you describe resulted from a number of factors, only one of which was the presence of a competitor who was willing to sell his product below cost. At the same time there was a well publicized bulge in the inventory pipeline, partly due to CPQ's changeover to build-to-suit ala Dell, below plan demand due to Asia's recession, and accelerated development expenses in response to the foolish competitor. Hence the short term margin erosion. Note this really has nothing to do with the falling cost of computing as measured by $/MIPS. As Charlie Munger has said, "short term, your business is only as good as your dumbest competitor allows it to be."[paraphrased] Fortunately, long term, dumb competitors run out of money and go out of business. As for QCOM, I don't know of any cdmaOne handset makers selling their product below cost, so it doesn't appear we have that problem. Reductions in handset ASP will continue and they are good for cdma in general and for Q in particular. Ultimately, what Q is selling is a unit of digital wireless communication (comparable to MIPS), and as the production cost and end-user price of these units fall, Q will prosper all the more. -Jim Its an analogy, Dave, so spare me the lawyerly arguments.