Qualcomm (QCOM) is now back to having a 4% yield… which was pretty hard to resist for me this week. The stock is in the headlines every day of late and is well off its highs, of course, following the high-profile pursuit by Broadcom (AVGO) that was called off this week, but not all the way back down the lows (the stock has ranged from about $51-67 in the past two years, and has also gotten a little optimism in the past 24 hours from speculation that the founder’s son, Qualcomm’s former Chairman, might try to take them private — though that seems a doomed effort). So I began, once again, to dabble in QCOM again in recent days.

This is a conundrum of an investment, to be sure — it’s one of the most dominant companies in wireless chips and intellectual property, with an incredible business and a phenomenal royalty/licensing business, and it’s also one of the best-posiitioned companies as we begin to ease into the transition to 5G wireless networks, which could be completely revolutionary and spur upgrade demand for years… but it’s also subject to some serious and severe risks: Apple is fighting their high license/royalty fees and trying to get rid of its Qualcomm dependence, Intel is pushing its way into mobile and wireless chips ever more strenuously, IP theft in China continues to be an issue, shareholders continue to resist Qualcomm’s efforts to acquire NXP Semiconductor to expand more into automotive, security, and other chip markets (and China could still scuttle that deal, too), and competition is strong in all their businesses.

And while revenue growth has shown some recovery this year, they are still below their peak years of 2013-2015… and the transition to each level of new wireless standards has brought their royalty rates down (they were dominant in 3G, less dominant in LTE, and may be less dominant in 5G, we’ll see), so their margins have gradually gotten worse since their “Qualcomm owns everything wireless” days, when gross margins briefly got above 70% and 3G was still the bulk of the business. Part of that transition was by design, as Qualcomm has built up its actual chipmaking business, selling more of their Snapdragon chipsets instead of just licensing their technology to other companies, but part of it was rising competition and a loosening stronghold over the mobile standard (and ...