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  • Energy Recovery, Inc. Remains A Good Pick For Value Investors [View article]
    One cannot predict demand for desalination pressure exchangers and pumps. ERII management has continually cautioned investors that desalination revenues are spotty, sometimes heavy, and sometimes not, depending on when items are shipped to larger or smaller customers.

    And even where demand seems to be great, actual sales often do not materialize. For example, the California drought should have triggered a lot of new demand, especially since digging more and deeper wells, as they have done, simply makes the land sink and reduces the amount of fresh water that can be obtained from wells later on. Yet, outside of one project begun a few years ago for the San Diego area, ERII has received virtually no new contracts in this area. Some environmentalists, in fact, say they don't want desalination plants unless those plants run on wind or solar power. Crazy.
    Nov 20, 2015. 11:20 AM | Likes Like |Link to Comment
  • Qualcomm May Suffer A Long And Slow Descent As Its Core Technology Loses Luster [View article]
    Apparently the bundling concept was what gave the Chinese (and others) some concern. The result could be just the opposite -- attaching a royalty/price to each patent or group of patents, rather than the whole bundle. It would complicate the collection of royalties and in the end might be more costly for the users.

    No one has come up with a better, more efficient, and more just way to price patents than to bundle them together.
    Nov 20, 2015. 11:12 AM | Likes Like |Link to Comment
  • Qualcomm May Suffer A Long And Slow Descent As Its Core Technology Loses Luster [View article]
    Though the Motorola–Microsoft case may have some relevance to the overall issue of QCOM charging royalties based on device selling price, rather than a specific value added computation for each device, I am more concerned about numerous efforts to degrade the value of standard essential patents, compared with other patents, such as the rounded corners on Apple's iPhones.

    In recent months, we've seen the IEEE, a standards setting body, make recommendations that effectively value ordinary patents the same as standard essential patents, sending those recommendations to Congress, among other places. We've also seen similar attitudes on devaluing SEP's by federal agencies. These efforts to devalue SEP's certainly would affect the QCOM business plan, but there are alternatives that might be considered.

    Qualcomm started out by licensing all its patents in a bundle, at one royalty rate. You could use as much or as little of this IP as you chose, but the price was always the same, calculated at a rate of about 3% of the wholesale price of the entire device. Later on, QCOM placed a cap on wholesale prices so that excessive royalties would not accrue on more expensive devices, such as higher end tablets.

    Then the Chinese got into the act by demanding a royalty based on 65% of the wholesale price -- simply another way of cutting the overall royalty per device. The Chinese previously had been allowed two different royalty rates, for domestic sales and for exports. QCOM allowed a royalty of about 2% on devices for the domestic market, and in compensation wanted over 5% for Chinese made phones that were to be exported. The NRDC agreement provided a uniform royalty rate, a bit less than what QCOM would have collected under the dual system, but a lot less, given that several Chinese companies were expanding rapidly into export markets. The new royalty rate effectively devalued standard essential patents.

    QCOM was willing to accept the new terms imposed by the Chinese because it was expected to facilitate collection of royalties from Chinese companies that never bothered even to get a license and that served mainly domestic markets. QCOM also expected that companies like Xiaomi and Huawei, with a growing export business, would be easier to monitor and collect from under the new formula. That actually hasn't happened so far. QCOM still reports having a lot of trouble collecting, and that issue alone should make us long term investors a little worried.

    Finally, the TPP trade agreement, once it is approved by Congress (if ever), should help resolve the Korean issue. Korea wants to adopt a royalty formula that runs counter to the terms of the TPP. But if Congress turns down the TPP, then QCOM is effectively left hanging in the wind.
    Nov 19, 2015. 03:41 PM | 3 Likes Like |Link to Comment
  • Qualcomm May Suffer A Long And Slow Descent As Its Core Technology Loses Luster [View article]
    The author apparently has no idea of the development (and patents) for CDMA and subsequent flavors of CDMA (such as WCDMA, CDMA2000, TD–SCDMA, etc.). The principle behind CDMA is similar to a process developed by Heddy Lamarr and her husband back in the 1940's, but CDMA is far different in implementation -- long after the original patent had expired. As for Flarion, one of its board members was Andrew Viterbi, a co-founder of Qualcomm. Flarion developed a unique directional antenna system that increased 4G efficiency. Qualcomm was always well aware of Flarion and bought Flarion and all its patents several years ago for $850 million.

    The patent issues surrounding Qualcomm licensing agreements are in the news because no company making cell phones for world markets can do without QCOM patents. It's just like the old RCA Corp., which had most of the AM radio patents and later developed most of the proprietary technology for TV. It will be years before cell phone manufacturers will be able to sell anything that doesn't make use of at least one claim on one patent. And that's all it takes to generate royalties. If that weren't enough, there are about 17,000 patents that QCOM licensees are entitled to use, if they want to.

    Qualcomm licenses any firm that wants to use QCOM chips or make their own chips, as Samsung does. Royalties accrue either way. If Samsung doesn't want to use a QCOM chip, then it can use its own, or others, but still ends up paying royalties to Qualcomm. Now the Koreans are whining about unfair licensing practices, which they've done before, and which will probably make no difference, just as the European Union did earlier, to no avail.

    Finally, Qualcomm is no longer just a chip designer for wireless communications. Its patents cover many new areas, such as automotive, wireless battery charging, and medical monitoring. To suggest that this company is going down the tubes is simply ludicrous. Or, does the author have another agenda?
    Nov 18, 2015. 01:40 PM | 7 Likes Like |Link to Comment
  • Premarket Biotech Digest: Isis's Potential, Clovis Sell-Off, Arrowhead Data [View article]
    The statement that "it [ISIS] has one approved drug, Kynamro" is somewhat misleading. Several years ago, ISIS received FDA approval for an antisense drug to treat CMV retinitis in patients with AIDS. The drug worked as intended and proved that antisense technology was a legitimate means to treat illnesses. By the time the drug was approved, however, sufficient treatments for AIDS had virtually eliminated demand for the drug. Kynamro is the first antisense drug to treat a condition for which there is only one other available drug.

    A more relevant issue is whether antisense technology can compete with vaccines that can trigger T-cell responses to an unwanted cell. If you look at research published in Science, the weekly publication of the AAAS, you'll find that the editors seem to prefer this method, especially when it comes to treating various types of cancers. The advantage of antisense technology, at least from views expressed by Dr. Crooke at ISIS, is that the same basic process for creating a molecule that binds with the unwanted cells can be applied to each new project, resulting in some economies in drug development costs.

    Judging by new immunology drugs being tested, there appears to be some overlap with the illnesses targeted by some of the antisense compounds ISIS is developing. I haven't been able to find any comparisons of which method is better or more economical. What is clear, however, is that the antisense technology being employed by ISIS, especially in newer compounds, seems to be effective, safe, and possibly less expensive potentially than other drugs under development for similar illnesses. I'd appreciate any comments on this issue.
    Nov 17, 2015. 02:54 PM | Likes Like |Link to Comment
  • Samsung's Strategy Is Set To Erode Qualcomm's Market [View article]
    Has the writer actually compared the operation of new phones containing either Samsung or QCOM chips? Probably not, since none of the new phones are on the market. The article is worthless because it's entirely speculative.

    Did the author even mention the fact that QCOM chips, and especially the new Snapdragon 820, use less power than the competition? No! That is an important feature to consider between competing chips. Did the author compare the fact that the 820 has four cores, whereas the new Samsung chip has 8 cores? That sounds like a win for Samsung, except for the fact that Qualcomm designed a chip with 4 cores to outperform those with 8 cores.

    As I said, it's a worthless article.
    Nov 16, 2015. 02:00 PM | 13 Likes Like |Link to Comment
  • Qualcomm Poorly Positioned To Compete With Apple And Samsung [View article]
    Samsung has a history of designing and manufacturing chips with the object of gaining a majority share of the market, thereby gaining control over its chip price. This strategy was behind its ill-fated attempt to drive SanDisk and SanDisk's joint partner Toshiba out of competition for NAND flash memory chips. About 10 years ago, Samsung began flooding the NAND flash market with its low-priced chips, causing losses for SanDisk, write downs of unsold inventory, and impairments to earnings. Samsung even offered to buy all of SanDisk for about $26 per share (though its ability to pay even that price was questionable). The end result was that Samsung lost a lot of money and SanDisk retained its technology lead, with market share almost equal to the 35% or so commanded by Samsung. The difference between the two companies is that SanDisk has ALWAYS retained a much higher gross margin than Samsung in this segment of the business.

    Regarding Qualcomm and Samsung, a similar strategy may be coming from Samsung, but for reasons noted in many of the earlier comments on this article, it probably won't succeed: Qualcomm has a better front end (modem) design that covers alternative bands, both licensed and unlicensed. Qualcomm may have a better processor that consumes less power than Samsung's processor. And Taiwan Semiconductor appears to have 16 nm technology capable of using less power than Samsung's 14 nm technology. In the event that Samsung decided not to use Qualcomm 820 chips in its phones, it's likely that Qualcomm would shift more production to Taiwan Semiconductor and/or Global Foundries, both of which are now capable of producing chips to Qualcomm specifications.

    Bottom line: I don't see the notion that Samsung will use ONLY its own chips on the Galaxy S7 as having a major impact on Qualcomm, inasmuch as the S7 will eventually be competing with lower priced phones from Xiaomi, Huawei, HTC, and others bent on gaining market share at the high end of smartphone prices. These companies already have indicated they will be using the Snapdragon 820 in various models they are preparing for next year. As for competition from Apple and its own processor design, a major issue is whether the Apple chip will have as many features (e.g., security, low power consumption) as the Snapdragon.

    Qualcomm retains a cost advantage because of economies of scale that apply not only to the quantities manufactured but the ability to spread development costs over a much larger chip market than that addressed either by Apple or Samsung. If the writer hasn't considered these factors, then he's not seeing the forest for the trees.
    Nov 16, 2015. 11:59 AM | 3 Likes Like |Link to Comment
  • Qualcomm: Love It Or Leave It? [View article]
    QCOM, based on comments I've seen from management and others, is preparing a special processor chip for servers. This chip is different from the Snapdragon 820, its newest cell phone processor, said to be available early in 2016, and currently acknowledged as the best performing (specs, at least) processor chip in the industry.

    Intel boosters have always claimed that only an x86 based processor can be used effectively in servers. But the ARM based designs used by QCOM, Samsung, Apple, and others, have become so fast and powerful that one can easily question the established Intel chips. Certainly the ARM chips use less power and may actually be faster, at least for certain types of applications.
    Nov 11, 2015. 01:09 PM | Likes Like |Link to Comment
  • Solazyme Closes Clinton And Deepens Ties With Bunge [View article]
    You can say that again.
    Nov 11, 2015. 01:01 PM | 1 Like Like |Link to Comment
  • Qualcomm: Love It Or Leave It? [View article]
    In addition to the $20+ billion net cash (after deducting long term debt created by bond issue for stock repurchase), one should note that the book value of the stock is still primarily in the form of cash and marketable securities. What this means is that, on the books, the value of the substantive part of the company, including its more than 17,000 patents is a pittance. On that basis, the stock at its current price is grossly undervalued. Intrinsic value, however, is typically ignored by investment firms relying primarily on technical analysis of price and volume changes.
    Nov 10, 2015. 01:04 PM | 8 Likes Like |Link to Comment
  • Now Is The Time To Short Energy Recovery, Inc. [View article]
    The author stated in his article of November 2 that ". . . I would think that the current price of $7.17 (as of the close on October 30) will drop by half (at least). Decreases in stock prices after announcements such as this are very common, and so the risk of the price not dropping is not that great."

    In today's trading (November 6), ERII reached $9.50 and closed at $8.62. There are several lessons that might be learned here. Most importantly, when the short position in a stock is equal to 35 days average trading, or even two weeks average trading, it is not a good idea to short the stock(!). Undoubtedly the soaring price reflects a classic short squeeze, where buying demand forces those who borrowed the stock in order to short it now requires that they close their short positions at whatever is the going price.

    Some people who delight in shorting a stock can only learn the risks the hard way.
    Nov 6, 2015. 04:15 PM | 1 Like Like |Link to Comment
  • Qualcomm: Is There Life After Samsung? [View article]
    The author justifies his view that the Snapdragon 820 won't be in the next Samsung phone with the statement that "Samsung typically releases new Galaxy S series smartphones at the end of the first quarter, around April, which means that production has to start early in calendar Q1. The revenue phasing for the 820 is just all wrong to be on the next Galaxy S."

    In case he didn't know, Qualcomm ALWAYS reports royalty and related revenues in the quarter following that in which the fees accrued (because of nominal delays in gathering the data). Thus, if Samsung were to announce its new phone in April, it's clear that revenues going to Qualcomm would not be recorded until the second half of the calendar year, which also means the third quarter of Qualcomm's fiscal year.

    A little more research on points like this might change one's view of whether the 820 will be in the next Galaxy. Or am I expecting too much of the author?
    Nov 5, 2015. 05:02 PM | 6 Likes Like |Link to Comment
  • Qualcomm's Results Were Abysmal: Investors Should Evacuate [View article]
    Your statement that "The company hasn't developed a large enough of a product portfolio outside of app processors and modem front/back-end silicon to offset weakness in core product fundamentals" is inaccurate. Qualcomm has five chips in Apple phones, and only one of them is the radio chip. Power management and a variety of other task chips are routinely used in smartphones and tablets. Through recent acquisitions, such as Atheros, Qualcomm has been able to increase its penetration in the market for Wi-Fi.

    Remember that to generate royalty payments (or patent infringement lawsuits) requires only one claim from a single patent. There isn't a smartphone being produced today for 3G and 4G users that doesn't use at least some QCOM intellectual property. Qualcomm doesn't need to sell the chips as much as it needs the royalties from others who also make and sell them.

    One major issue that was not covered adequately in this article, or for that matter, in the conference call yesterday, is the difficulty of getting some Chinese phone makers to pay royalties, especially on phones designed solely for the domestic Chinese market. One should not have any confidence in either a sell or a buy recommendation without more information on this critical issue.
    Nov 5, 2015. 12:06 PM | 5 Likes Like |Link to Comment
  • Now Is The Time To Short Energy Recovery, Inc. [View article]
    The pressure exchangers made by Energy Recovery have better than 90% reliability, and there are very few instances of breakdowns, though there are some instances of pressure exchanger upgrades. There is no competitive product that demonstrates as good reliability. There are also no patent issues between ERII and Isobarix. ERII, furthermore, makes not only the pressure exchangers but the pumps that are tailored exactly to the requirements of the pressure exchangers, providing a package that really has not competition either in cost or performance. These are sufficient reasons why ERII dominates this part of the desalination market, and why it has virtually no competition.

    The subject of the article was the notion that ERII is a good candidate for short selling. Prior to the Schlumberger announcement, the short position in ERII shares was over 30 days -- one of the largest short positions of any stock on the major exchanges. Shorting stocks is risky, precisely because a new development, such as the agreement with Schlumberger, can lead to a short squeeze, forcing those who have shorted the stock to buy it back involuntarily, at whatever may be the going price. The long term implications for ERII are now very good, irrespective of the current short position (which we don't even have data on). At the very least, the stock should be seen as a good long term hold, and maybe even a buy at prices closer to $7.00.

    Finally, those who think that short sales can enhance one's investment portfolio should be aware of the following rules of thumb, based at the very least on my own experience of more than 60 years active investing:

    1. Do not EVER short a stock selling for less than $10. It's too volatile.

    2. Do not EVER short lightly traded stocks, where there is insufficient float to guard against price fluctuations. Again, too much volatility.

    3. Short sale candidates are generally very large capitalization stocks like WalMart, Kodak (before its bankruptcy), and Volkswagen.

    4. Most obviously, do not EVER short a stock where the existing short position is unusually high (e.g., more than three or four days' average trading volume.
    Nov 4, 2015. 11:52 AM | 5 Likes Like |Link to Comment
  • 3 Things You Need To Know About Qualcomm [View article]
    Mostly conjecture in this article, based on faulty data and/or faulty assumptions. Suggest you revise the article after the latest financial results are released later this week. In fact, you would have been better off waiting for the latest data.
    Nov 2, 2015. 06:43 PM | 7 Likes Like |Link to Comment