Thanks again for taking the time to provide a response to my comment questioning your “Unstrung” article (Qualcomm: In Need of a Revamp) statement-
“...We see no upside in this stock anywhere in the foreseeable future.” “ I'm sure at that writing you didn't define "foreseeable future" as only a few short months.”
With- “I think 6-12 months is not an unusual amount of time to reverse course/opinion on wireless investments”.
Your response appears perfectly reasonable in that someone can reverse an investment decision in a relatively short period of time based upon changing circumstances/ new information,etc.
However I believe when you wrote that article you were not discussing Qualcomm as a short term investment. From the following quotes, it appears you were evaluating QCOM’s long-term investment prospects – “We're talking more long term, though – like where the company will be five to ten years from now.”
• “Since that dramatic rise in 1999, our message about Qualcomm has been consistent: We see no upside in this stock anywhere in the foreseeable future. Granted, it was easy to say this at the early 2000 peak (unless of course you loved the company). But it hasn't been very hard to hold that position even today. The company is still richly valued, given its growth prospects going forward. • • Now, many investors are quick to point out that you can make money on Qualcomm – by trading the stock based on short-term swings. If you want to trade the stock based upon what the Chinese and Koreans are saying today or tomorrow, go right ahead. We're talking more long term, though – like where the company will be five to ten years from now. “
The following passage also made reference to “little appreciation going forward”
• “But we think Long is spot on with his analysis. Assuming Qualcomm posts earnings per share of $1.05 for fiscal year 2003, that would mean a price-to-earnings ratio of 33, which is a bit rich for a company that is projected to grow 10 percent to 15 percent annually. Until Qualcomm transforms the company and renews itself, showing traction in new markets, we see little appreciation going forward. “
Reference- EPS-Core Ops W/O QSI • 2002......$0.98 • 2003........1.05 Mock analysis as of 11/02 (with “little appreciation going forward”) • 2003........1.175 Original Guidance- MP • 2003........1.42 Actual • 2004........1.40 Original Guidance-MP • 2004........1.75 Q Rev 4/21? • 2004........2.42 With 38% chipset capacity increase in Sept Qtr.
I believe you would agree that your Unstrung article was quite a damning indictment of Qualcomm, questioning its viability in most all areas with passages / questions such as -
• 1. “Countless prophets predicted that Qualcomm would essentially own the global wireless market for radio base station and subscriber equipment in the coming decade, reaping royalties on every item of equipment sold. As ever, reality has fallen significantly short of these expectations (as it always does)” • • 2. ” Since that dramatic rise in 1999, our message about Qualcomm has been consistent: We see no upside in this stock anywhere in the foreseeable future. • • “The company is still richly valued, given its growth prospects going forward. “ • • 3. “The Royalty Question “- rehash of IPR fears, etc • • 4. “Companies must constantly reinvent themselves to stay ahead with intellectual property. It is a very dynamic market, and determining the future value of IP and how it relates to a company's stock is difficult. An IP company that stays in a technology niche is usually doomed, so it's important to invest in multiple standards as technology evolves.” • • 5. “In the long term, its leverage in CDMA will only decrease, not increase, so there is little chance for positive surprises in this area” • • 6. “Qualcomm is a very good chipset designer. The problem is not the product, but the product mix and customer channels.”. “The bad news is that there's little incentive at this point for any European companies to leave their trusted suppliers and side with "the enemy." “Qualcomm devotees are banking on the collective technological failure of the entire Eastern Hemisphere to make this happen. Don't hold your breath. In fact, don't waste three seconds considering it.”
From the above, one would conclude that since the end of 1999, you were not recommending QCOM as an investment. Yet, from a TMF post it appears that you owned QCOM (and owned it for a long time) at the time you wrote the Unstrung article.
“I sold out of NOK long ago and have been long QCOM for some time now,...”
Source: NOK and Wieless Thread repost of Dave Mock TMF response- (11/11/02)
Last year George Gilder wrote- “ I have just finished reading a forthcoming book (late 2004) on Qualcomm by Dave Mock. It makes a powerful case that Qualcomm is the best technology company in the world. “
The momentous inconsistencies continue to beg for a clarification–
...Owing QCOM while disparaging it, and
...Going from such a strong indictment against Qualcomm to making “a powerful case that Qualcomm is the best technology company in the world “.
Perhaps it is simply that you along with most the journalists/ analysts in wireless world were overwhelmed by the propaganda from the incumbent GSM/ GSMA establishment and simply didn’t understand the significance of CDMA/ Qualcomm. As was stated in the close in one of your recent articles-
“DAVE MOCK is CDMA-challenged but hopes to get back to the future soon.”
Tim Hoffman of Soundview is also a recent convert, and I believe a former Ericsson employee in the GSM camp.
But, then again, why the revelation that you were a long time owner of QCOM at the same time you unequivocally stated - “We see (you saw) no upside in this stock anywhere in the foreseeable future. “?
You concluded your latest post with – “Maybe with more time and in a future post, I can go into more detail about what things I saw developing that led to my "reversal".
I hope you’ll find the time to do that as I’m sure there many long time QCOM “Devotees” who were passionately caught up in the wireless “holy war” fighting off the FUD dying to know the “ins and outs” of the driving forces of-
1. such a strong passionate opposition to CDMA/ Qualcomm / misunderstanding of CDMA/ Qualcomm .
2. the sudden (apparent anyway) reversal and events/ reasons leading to such.
Dave- In any event, it’s good to have you and the others finally positively recognize Qualcomm /CDMA as a great company/ technology.
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