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: MMW who wrote (26643)	4/10/1999 3:43:00 AM
From: Bux	Read Replies (2) \| Respond to of 152472

Good questions Mike. Only one area it has done very poorly. That is its net margin, only 3.4%. Comparing with other traditional growth companies, MSFT, INTC, CSCO, DELL, and VTSS. QCOM is nowhere near its peers. This also reflects its management efficiency. Only $10,000 net income per employee. The analysts have harped on margins for awhile now. I think management has been concentrating on establishing a world standard and building expertise in CDMA and a number of other pioneering technologies that will prove immensely profitable over time. Ericsson claimed in a recent press release that they are the "knowledge" company but the Q's achievements convince me that they are more deserving of that title. IMHO Qualcomm is gradually transcending their reliance on manufacturing profits in favor of royalties. Royalties come in many flavors. IMHO Qualcomms ASIC division profits are essentially "royalties" since the chip-making is contracted out. MSFT's primary profits derive from a parallel situation with a major difference. MSFT didn't need to invent and manufacture the PC in order to demonstrate the worth of their products (IBM and others did that). In Qualcomm's case, TDMA technologies were already entrenched by the time CDMA was ready for market. Qualcomm was forced to create working systems in marketable quantities in order to successfully challenge TDMA/GSM. I am of the belief QCOM should divest themselves of the handset business (Nokia, ERICY, ?) (after demonstrating the excellence of the thin-phone this summer) and concentrate on developing and selling the worlds best mobile ASICS (contract manufactured). This will allow Qualcomm to maintain a relatively small work-force while simultaneously watching sales, profits and demand for/of ASICS increase exponentially as new applications (smart vending, wireless auto's, PdQ's, wireless wallets, etc., etc.,) find demand. IMHO, margins are low because the Q is still relying upon manufacturing for profits and to hasten the displacement of entrenched TDMA based technologies. In other words, the Q hasn't even rounded first base yet. And look at that ball fly, fly, fly away! Bux

To: MMW who wrote (26643)	4/10/1999 6:06:00 AM
From: Robert Scott	Read Replies (1) \| Respond to of 152472

Sale of the infrastructure business to Ericson will greatly improve margins because it was a huge money loser. As CDMA expands worldwide, ASICs business will do well so I believe its really a question of their competitive position in handsets and the wireless business generally. If you think wireless will be strong and that QCOM can compete with the heavyweights, invest in the company. I might add that owning many of the patents for the new world standard and the idea that we will do more and more with cellphones in the future has me convinced of the opportunity.

To: MMW who wrote (26643)	4/10/1999 11:03:00 AM
From: Andrew N. Cothran	Read Replies (2) \| Respond to of 152472

Go back to Gildertech beginning in November, 1966. George has not hyped QCOM. He has been way out front reporting on QCOM'S tremendous lead in next generation technology. He has also reported on many others of the telecosm companies (telecosm is a word he conjured himself) way ahead of the investing publics' awareness of their work and true merit. For instance, he brought GLOBEX to readers' attention in November, 1998, at a then price of $14 with a full description of why GL0BEX was destined to become the ATT of the next century. If you had bought 1000 shares of George's Telecosm world of stocks when he first included them in his list (assuming that you could have bought them at his entry price,) you would have invested a total of approximately $758,112 which would have a market value today of $$1,826,375, (a net gain of $1,068,263)all of this since November, 1996. Your portfolio would have gained $37,312.50 yesterday alone. Not bad. Not bad at all.

To: MMW who wrote (26643)	4/10/1999 12:05:00 PM
From: Clarksterh	Respond to of 152472

Mike - Only one area it has done very poorly. That is its net margin, only 3.4%. Comparing with other traditional growth companies, MSFT, INTC, CSCO, DELL, and VTSS. QCOM is nowhere near its peers. This also reflects its management efficiency. First, I concede that 3.4% net margins isn't great, but it should grow substantially now that the infrastructure division is no longer a drag on earnings. I'd be surprised if we didn't see margins of between 5 and 7 percent starting next quarter. Only $10,000 net income per employee. I've never trusted this metric. There are at least three ways to manipulate this statistic: 1) Become more efficient with your current employees, 2) Outsource your employees, 3) Install automation. Only number 1 is an unmitigated benefit. Outsourcing in and of itself (i.e. without saving any money) can increase this number dramatically, but without actually effecting the bottom line. And automation for automations-sake is also a silly game if your costs remain the same; as a stockholder I really don't care if the cost of sales is due to machinery maintenance or people's salaries. Given that item one is the only really beneficial way to achieve this statistic, but we have no way to determine which was the cause of the increased rev per employee, I discount the statistic heavily. JMO Clark

To: MMW who wrote (26643)	4/11/1999 1:49:00 AM
From: Mr. Sunshine	Read Replies (2) \| Respond to of 152472

Regarding gross margins, I do not see this as an issue at all. The following is from a post I wrote on the "Gorilla and Kings" thread to answer someone's concerns about margins: "...As a result, they generate meager 3% gross margins..." Keep in mind that QCOM has recently shed two of thier money losing ventures. They spun off Leap Wireless (LWIN) in October and have now sold the infrastructure division. Both of these ventures fulfilled strategic goals, but were large negatives on the balance sheet. With the disposal of these two net income draining items, the substantial increase in almost 100% margin royalties, and an increase in ASICS and phone sales, gross margins will explode. Legal expenses from the lawsuit with Ericsson were also affecting the bottom line, thus hurting margins, though I have no idea to what extent. Now that the suit is settled, the money that was going to the lawyers can now go directly to the bottom line, and eventually into our pockets. Do not overlook that this company has numerous "hidden" value items that are not necessarily reflected in the share price. OMNITRACKS is a cash cow and growing, especially internationally. Eudora is one of the most popular e-mail programs. WirelessKnowledge, a joint venture with Microsoft will probably be spun off in the next year or two. Globalstar service should launch this year (QCOM has 7% ownership and major equipment supply contracts). CineComm was a total surprise to most of us at the most recent annual meeting, but Dr. J seems to think it has tremendous potential. They have some military/government contracts, although they are highly classifed and not talked about often. All the above are emerging businesses in their own right and can be expected to contribute to earnings as they develop and start making net profits. QCOM also has a large R & D budget, allowing them to come out with new surprises fairly often. Who knows what else they are working on? I strongly agree with Michael Murphy, editor of the California Technology Stock Letter, that R & D is the lifeblood of the high techs and should be added back into net income as it is more of an investment that increases shareholder value than an expense. (Ironically, Michael Murphy did not believe in the Q. I asked him his opinion on QCOM at an investors conference he spoke at a couple of years ago, and he was pretty doubtful about CDMA. His book "Every investor's guide to high-tech stocks& mutual funds" mentions QCOM and CDMA most unfavorably. I told him he was wrong about the Q as he was signing my copy of his book! But I do agree with his methodology in valuing high tech stocks). For all of these reasons, I do not feel that past gross margins are an effective barometer to determine QCOMs future potential or its membership in the Gorilla family.