|To: Webster who wrote (10843)||5/23/1998 11:42:00 AM|
|From: straight life||Respond to of 152330|
This appeared on the Yahoo QCOM BB; I think it's of interest. Responses? |
Message 4911 of 4934
Reply Regarding managementMalcolm_Dent
(29/M/Washington, DC) May 22 19989:57AM EDT
I know this statement will stir up lots of controversy and many here will disagree, but to many wireless suppliers and Wall Streeters, Qualcomm's management team is not highly regarded. More, management is perceived to be very arrogant. This isn't a concern that should immediately be disregarded or put down. This is concern that should be put to debate.
Why do I say this? Because not only have I experienced Qualcomm arrogance on my own part, but because many of my colleagues share the same view. I work in the building across from the Cellular Telecommunications Industry Association (CTIA) here in DC. My fiance worked for the communications & convention department and we still have good friends there. Their relationship with Qualcomm, should I say, has been less than cordial.
Institutions and investment bankers want to see consistency. A smoothly run operation is highly regarded as a demonstration of management's mastering of the ebbs and flows of production and supply and demand. When operations are not run smoothly, bankers see heightened risk, whether it be management's doing or because it is just business-specific. The greater the perceived risk, the more costly it becomes for a concern to obtain needed capital. Qualcomm, since inception, has not delivered any consistent results. Just when something goes right and everything looks to be on track, some slip up occurs. And more often than not, the slip ups are not communicated well with the Street, which only exacerbates the problem.
Some in this forum have said that several of the Wall Street analysts that have little regard for QC have little knowledge on the company. To me, that's not the analysts' fault, it's the company's. The company needs to constantly communicate with the analysts to make sure that each analyst understands the company correctly and that its message is getting to the investment community. The company's mentality toward the Street should be "what can I do for you." Instead, QCOM approaches the Street with "what can you do for me" mentality.
So you say so what? So what if some Streeters are ponzies and who cares if they don't understand let alone like the company? The bottom line is that is costs QCOM more in the end than is tangible now. Here's why. Say Qualcomm rounds up a bunch of private investors for a round of debt financing. Say they got Ford Pension, Wisconsin State Education, Bank of New York, etc. Qualcomm gets its prospectus drawn up from its investment banker, filed it with the SEC and has sent to the private guys. The Ford pension guys will do their homework. But they will also want a second opinion from the Street. So they call the very same analysts that have little regard for Qualcomm. They call up Merrill who has said the he wouldn't be suprised if QC was out of the handset business within two years. Then Ford calls Alex. Brown and they say that the company can't seem to get any consistency in their profits and margins. Ford makes their assessment and goes back to QCOM that they would be willing to loan then funds for 8 3/4% rather than the initial 8 1/2%. Then Ford asks for provisions such as call protection and other coventents that hold QCOM to certain operating procedures. In effect, the cost of capital has become more expensive for Qualcomm...and to equity investors since, in this example, means higher interest expense.
Bringing the argument full circle. Enter Nortel. Here's a company that is highly regarded on the Street and has a good management team with already established relations with many of the world-class carriers. Although this scenario can also happen to NT, it is less likely. And if NT bought QC, it could lower the Qualcomm's cost of capital.
FOOD FOR THOUGHT.