Over the past decade, Qualcomm
Qualcomm's FLO TV mobile television business, which the company now appears ready to sell, has to rank among its most financially destructive boondoggles. Yet while the days of FLO TV burning through Qualcomm's cash pile might soon be over, it looks like Qualcomm is far from finished in wrecking shareholder value through bad investments in wireless service providers.
Money FLOs down the drain
Qualcomm launched FLO TV, which uses licensed spectrum to broadcast 16 channels of content to Verizon
The biggest reason why FLO TV flopped is the fact that the service isn't supported by the most popular American smartphones – neither Apple's
Is India Qualcomm's next cash sinkhole?
In a nutshell, FLO TV became a disaster for Qualcomm because it was involved in a market where its services were largely unnecessary. And that has been a recurring pattern for the company's QSI investments. Prior to FLO TV, Qualcomm took large stakes in wireless carriers in Mexico (Pegaso Telecommunications), Brazil (Vesper), and Europe (Inquam Telecom), as well as satellite carrier Globalstar, in order to drive the use of its preferred wireless technologies. All of these investments turned into duds as the carriers either found limited demand for their services, or were squashed by incumbents with far greater resources.
And just as Qualcomm is finally cutting its losses with FLO TV, it's committing itself to yet another costly, high-risk attempt at being a service provider. Last month, the company spent more than $1 billion to purchase 4G spectrum licenses for a handful markets in India. Qualcomm intends to use the spectrum it arguably overpaid for to build out an Indian 4G network with the help of a local partner, before selling the stake. Only problem is that seven other carriers have also gotten their hands on 4G spectrum, including wireless leaders like Reliance's Infotel, Bharti, and Aircel. Should we really expect Qualcomm's attempt to bankroll a wireless network in India to end any better than its attempts to do so elsewhere?
It's hard not to be skeptical. Which is quite a shame. Because as long as you can't rely on Qualcomm to either hold onto the billions in cash flow it produces through its chipset and licensing businesses, or to return that money to shareholders, it's hard to get excited about it as a long-term investment.
Fool contributor Eric Jhonsa has no position in any of the companies mentioned. Apple is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.