Seybold Calls on Qualcomm

11/08/2002 12:00 am EST


Andrew Seybold

Editor-in-Chief, Forbes/Andrew Seybold's Wireless Outlook

    Andrew Seybold has followed the wireless sector for 30 years. He has three golden rules for investing:  #1: Buy companies that are building the infrastructure of the wireless economy. #2: Buy companies that are growing their customer base 15% to 20% every quarter. #3: Buy companies that reap huge profits from licensing their technologies."  No one knows this industry better. Here's his current outlook.

    “We’re now a mobile society. We now have 50% penetration in wireless voice devices. We have 3rd generation wireless data coming on line. We have wireless in the home now. We have the entertainment world starting to push wireless in the home to marry the computer and Internet and entertainment. It’s a great sector. What’s happening at the moment is that most of the companies are making huge investments in the future. The Wall Street analysts don’t understand the investment in new technology that will take some time to pay off. I think it will take a year or so. 

    “The Feds have been particularly unkind to the wireless telecom sector. There was a wireless auction held two years ago, where the FCC sold spectrum that Nextwave had already bought, and they didn’t have the right to sell it. So the wireless companies have been sitting there with $16 billion of debt on their books for spectrum that they can’t own. There are two things happening right now. One is that the FCC - with Congress and the Bush administration putting pressure on them – are going to forgive those debts. The second is that it looks like the Supreme Court is going to agree that the FCC had no right to resell that spectrum. Both of these are very positive signs in the market. So I am very encouraged. I look at this period of time right now as a great time to buy into the wireless sector, which is in the dumps. When it comes back, it is going to come back roaring.

    “I’m big on Qualcomm (QCOM NASDAQ) for one reason that Wall Street analysts don’t understand. There are two flavors of 3rd generation technology coming to the world. There is the Qualcomm-flavor, known as CDMA and there is the other flavor, known as wideband CDMA. The latter was developed by Ericcson, NTT DoCoMo, and NEC, deliberately to circumvent the intellectual property owned by Qualcomm. It didn’t work. Qualcomm has proven that they own intellectual property for both CDMA and wideband CDMA. They have cross-licensed both to every manufacturer. The issue right now is that wideband CDMA 3rd generation systems have been pushed out in Europe and Asia two to three years, but they are going to come on line working well. So I like the company."

    Editor's Note:  All excerpts from the Forbes editors in this issue of The Money Show Digest are from a panel discussion held at the New York Money Show on Friday, October 25th.  Quoted stock performance, portfolio performance, etc., have not been updated to reflect changes in the market since that date.  

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