Although it is frequently referred to as such, using the definitions in the Gorilla Game book, Qualcomm in NOT really a gorilla, as it does not have a leading share of the market...in fact, it isn't even close. Now, certainly there are reasons to be hopeful that it may some day be the wireless gorilla, but for now, it is really GSM that is the gorilla: they have leading market share in a proprietary technology with high switching costs (although, as far as I know, there is now one company fortunate enough to be profiting off of this).Which brings up an interesting point: if GSM is the Gorilla, how could a chimp (CDMA) take over its gorillahood??? In my opinion, if the wireless world remained a voice-only world, then CDMA likely could NOT become the gorilla. The thing is though, there is a discontinuous innovation--wireless INTERNET--that is poised for a major tornado (although, so far, there is NO tornado). And this discontinuous innovation gives Qualcomm the OPPORTUNITY to replace the GSM "gorilla".And it's product is clearly superior than any GSM offering...so, hopefully, it can become the new wireless gorilla. But it is NOT there yet, and it would be naive to think the current gorilla will just lay down and die...there's too much capital invested in the current GSM network for its current users to not TRY to keep it alive with EDGE.
Jungle,Qualcomm is the gorilla of the CDMA technology adoption life cycle. You might want to revisit your thoughts on that. Nobody has ever argued that the GSM technology adoption life cycle has the corner on the market at the moment. Yet, name a gorilla within the GSM technology adoption life cycle for us using the criteria.BB
note: first let me say i know nothing about qcom. I don't care to know anything about them.Ok, that's out of da way.My take (and it's probably totally wrong), how can qcom be a gorilla when it's main advantage is it's patents? I mean those run out..Microsoft is a gorilla. It doesn't rely on patents, yet it has a VERY strong value chain. High switching costs, ect..Same with Intel or Cisco.I believe, The Gorilla Game outlined all of the important aspects a company must have to live a healthy and prosperous life and grow to be a very old primate. Mr Buffet believed technology was too fast changing to create long term value, but he was wrong (obviously). If a company creates a strong value chain and becomes an open proprietary standard, then companies are more reluctant to support another standard; therefore technologies companies can be good long-term investments. Just look at Microsoft. Conquers the operating system, then moves into applications, then uses Internet Explorer to make MSN the default page and becomes one of the top portals on the net. If that's not long-term value then i don't know what is..So does qcom have this attributes? A simple yes your right scrim or no your wrong will do. If some one like BruceB wants to go into a some detail on why i'm wrong i'd appreciate it.
scrim,note: first let me say i know nothing about qcom. I don't care to know anything about them.I'm not trying to be critical, but I couldn't let this pass without saying 'why not'? That just seemed like an odd statement. Are you against good investment ideas and making money? Now I'm not saying QCOM is the best investment on the planet, but I do think they are a good one. If you really want good investment returns I would think you would want to do DD and find out what they are all about. QCOM is not just some flash in the pan. FWIW.Jeff
I've often wondered this same thing, but not in connection with the CDMA vs. GSM technology. My question is where is the tornado? According the the GG, the Gorilla emerges from a tornado, which is characterized by Y/Y revenue growth of 100% or more.QCOM's revenue growth the last five quarters:941.2 million932.4 million1004.1 million1059.6 million1120.1 millionI realize QCOM's stock tornado'd this year, but I thought the tornado was supposed to be in revenues, since revenues and earnings really drive stock price.If you take a look a earnings, the last five quarters look like this:.08-.08.09.20.23A bad second quarter '99, but otherwise good growth. The estimate for this quarter is .24. It seems to me as if revenues have NEVER approached tornado proportions, and while earnings arguably have, they are slowing down.Maverick.
LOL!The post which scrim1 contributed begins with this:note: first let me say i know nothing about qcom. I don't care to know anything about them.In terms of Qualcomm being a gorilla, scrim1 finishes his post with this:So does qcom have this attributes? A simple yes your right scrim or no your wrong will do.Sorry, you said you don't care to know anything about them..... ;-)BB P.S. Have you read the book?
Maverick,You'll need to spend some time studying the business model changes at Qualcomm which the sale of the handset division to Kyocera is key to your research. When searching for the CDMA tornado, go back to April of 1998 and look at units shipped for each quarter since. You will find your answer within that study.I don't mean to be short in my answers, but I am swamped. Helping with the Rule Breaker seminar, rehearsals, kids, sick with a cough and reading a really good book that captures my few spare minutes.Most of the issues concerning Qualcomm have been covered in depth all during 1999. If you search on the Qualcomm board and even on this board - you will find some good information.Qualcomm is the gorilla of CDMA. No point in my need to rediscover that on a monthly or quarterly basis. If others have not yet discovered it, I would prefer all to dig deep into The Gorilla Game book and apply the criteria to one's research so that they can discover it.BB
Fair enough, Bruce. Doesn't really matter, since I'm already long QCOM, refuse to sell anything (not my style) and have exactly $0 to invest.
OnAJungleHunt wrote:certainly there are reasons to be hopeful that it may some day be the wireless gorilla, but for now, it is really GSM that is the gorilla: they have leading market share in a proprietary technology with high switching costs (although, as far as I know, there is now one company fortunate enough to be profiting off of this).3G wireless systems are based on QCOM intellectual property. GSM will transition to 3G technology like all the others.scrim1 wrote: My take (and it's probably totally wrong), how can qcom be a gorilla when it's main advantage is it's patents? I mean those run out..It IS wrong. QCOM is not just a patent collection. It is the leading designer of CDMA chipsets. It is the leading researcher of CDMA technology. As such, it comes up with new inventions on a continuing basis. I have no doubt that its intellectual property will keep growing and new patents will replace old ones. It is the company enabling CDMA deployment around the world, and CDMA will become the dominant technology with the coming of wireless data transmission. It has a strong value chain.But I guess you don't care to know anything about QCOM so, for you, it's a moot point.vumaverick wrote:It seems to me as if revenues have NEVER approached tornado proportions, and while earnings arguably have, they are slowing down.You really need to examine the numbers beyond simple arithmetic. This company has been undergoing a major reorganization over the past year and a half, like the divestiture of various businesses that contributed heavily to revenues. If you isolate revenues and earnings for the businesses that continue, you will detect adequate growth characteristics.The GG book sometimes gives the impression that detecting the "right" companies is easy and arithmetic. It is not.CDMA is the future with the coming of wireless data. There is no company with nearly the resources dedicated to developing CDMA intellectual property AND to enabling CDMA implementation (through chipset design) than QCOM. These two areas are enabling wireless data transmission and QCOM will be in the middle of all this for some time to come. --fox
I'm not trying to be critical, but I couldn't let this pass without saying 'why not'? That just seemed like an odd statement. Are you against good investment ideas and making money?Cause i'm busy and i'm looking for the next 2,000% gainer this year. Seriously, i know a little about qcom (actually read a report on them today), but they are too big and the upside potential isn't there at lest for me.Sorry, you said you don't care to know anything about them..... ;-)ahah...fine be that way ;)But I guess you don't care to know anything about QCOM so, for you, it's a moot point.Ok, now i'm thinking probably should have left that part out ;)
scrim1,Cause i'm busy and i'm looking for the next 2,000% gainer this year.When you find it thru doing your own DD, let us know so we can tag along on your coattail as you want to do on ours.
Maverick-I'll add a few comments to BB's response.You have correctly noted from the revenue numbers that QCOM has failed abysmally in obtaining YoY revenue growth of 100%. If you dig deeper into these numbers you'll find the reason for this.Most of the poor earnings growth in 2Q99 were caused by their money-losing or low-margin businesses: the cellular infrastructure (which they sold to Ericcson last summer) and the handset business (which they sold to Kyocera this quarter). Both these businesses generated tremendous revenues but very little, if any, earnings. Ergo, they were a real drag on the overall performance of the company. It also happens, that these businesses were not what made them a gorilla. They had a lot of competition in both. The original reason they entered these businesses was to promote their CDMA technology. When they first tried to introduce this new technology, very few companies were willing to support it. Therefore, QCOM got into all facets of the CDMA value chain in order to get CDMA adopted. In the end it paid off. However, QCOM was stuck with some money-losing businesses that, while contributing to revenues, were a drag on earnings, the bottom line.So as CDMA became more accepted last year, QCOM began to shed itself of these low-margin businesses and maintained it's highly profitable CDMA royalty and chipset businesses.Thus, looking at revenues this year, over last year, doesn't really give an investor the whole picture. The revenue numbers will be more useful a year down the road when year-over-year comparisons will give a better picture of revenue growth of the core gorilla businesses, excluding those low-margin commodity businesses.A very good link to some of the discussion can be found on the SI Gorilla and King board. I'm sure there are several messages smattered about from last year that cover this issue.Here's the link.http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=25851Enjoy!LauraDisclosure: Long on QCOM, as long as it provides, in my estimation, the best technology for the buck. For the life of me, I can't understand this tension between QCOMers and GSMers. I'm here to make money, not to fall so in love with a technology that I am surprised by "discontinuous innovations." That's how great companies become next year's losers. And that's how great investors become next year's losers. I find one can't talk objectively about the CDMA/GSM debate without someone getting emotional or dismissive. It is unfortunate because picking the winner of the future wireless infrastructure can make us lots of money.I hope this board will be different. For example, the MOT announcement of the newer, better 1X Plus CDMA chip seems to be competition to QCOM's 1XRTT.http://biz.yahoo.com/bw/000228/il_motorol_3.htmlI spoke with my wireless friend about this, and he claimed that while MOT's new chip provides higher data rates, he believes it will also increase the power requirements of wireless handsets. He says you can't have one without the other. Any comments?Also, another interesting article from the QCOM board on some GSM/TDMA companies move to position EDGE as a 3G technology.http://www.eet.com/story/OEG20000303S0047This would significantly slow the adoption of CDMA in Europe. This is probably good for telecoms in Europe because they do not face competing technologies and will not be required to put up the money for costly W-CDMA upgrades. On the other hand, I don't believe this is a good move for companies such as AT&T because they truly face intense competition from CDMA carriers. Any comments?
My question is where is the tornado? According the the GG, the Gorilla emerges from a tornado, which is characterized by Y/Y revenue growth of 100% or more.You may not see evidence of a tornado in QCOM's revenues, for reasons that others have addressed well. But look here:The number of CDMA subscribers worldwide has grown from 5M at the end of 3Q 1997 to 17M at the end of 3Q 1998 to 42M at the end of 3Q 1999
Great thread!I've been struggling with making a decision on how to invest in the wireless space for a while now. I think one of my major concerns is: How do we define a "space"?QCOM is clearly a gorilla in the CDMA space, but is it fair to narrow our focus like this? Isn't wireless communications the broader space we should be considering? I could easily argue that AAPL is the gorilla in the Mac OS "space". By changing our definition of the playing field, the gorilla game dynamics change significantly.Despite this, I think QCOM is the best positioned company in the wireless space even if they are only a gorilla in their CDMA habitat. The rest of the industry has non-proprietary standards (GSM) which make it a lucrative royalty game. But 3G has the potential to change the rules. QCOM's technologies will be a big part of whatever standard emerges and has the potential to control it. Overall wireless gorilla status will not be far behind.Be wary of the definition of a "space". QCOM may be a great pick anyway, but faulty analysis of an industry can lead to the premature crowning of false gorillas (can we call them saskwatch?).Just musin'-S
Also, another interesting article from the QCOM board on some GSM/TDMA companies move to position EDGE as a 3G technology.Have some notes here from Q's last analyst meeting. In regards to Edge Q's management adamantly stated that both 1XRTT CDMA and CDMA-HDR can be overlaid over existing TDMA and GSM networks with no more expense than deploying EDGE and with performance advantages. Whether or not this will happen in Europe is anyone's guess, but in a truly competitive market like in U.S. and Japan, this would make sense. Europe, who knows.Also as far as Tornado, I have a broker report here that lists 3-5 years estimated EPS rate as 60%. That is 60% five years out for a company which already has over a billion dollars in profit per year. That is a Tornado folks.Tinker
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