The wireless and telecom sector has had its share of ups and downs lately -- with the downs being harder pressed into the minds of investors. Many popular wireless companies such as Qualcomm(Nasdaq: QCOM), Nokia(NYSE: NOK), and RF Micro Devices(Nasdaq: RFMD) are 50% or more off their 52-week highs. At one time this high-growth industry seemed to be untouchable, continuing dramatic growth even as the larger economy started to falter in 2000. Now investors are talking more about which potential bankruptcies to steer clear of. What a difference a year can make.

But not everybody is singing the wireless blues. In fact, there are a few who are quite bullish on wireless. Where others see disaster they see vast opportunity. Such is the outlook of longtime Fool Dave Mock and Tom Taulli, authors of newly released Tapping Into Wireless from McGraw-Hill.  Tom and Dave (not the Gardner brothers) sat down recently to talk about the book with the Fool's Bill Mann (TMF Otter).

TMF: What was the inspiration to write a book on wireless communications? More specifically, investing in wireless companies. Certainly seems like a Chamber of Horrors these days.

Dave Mock: I was a techie who realized that -- despite the huge industry -- there were no easy-to-understand guides on wireless for investors. So in 2000 I penned two titles for The Motley Fool's called Wireless 101 and Wireless 201. These turned out to be among the bestsellers for the site, and even though is no longer available, these reports are still popular as eBooks today.

TMF: Who says wireless is dead? OK, that explains the interest in the topic. How did you and Tom come to the decision to expand these reports into a book?

DM: Tom and I have been friends since college and decided to work together to compound our understanding of technology and finance to create a hardcover book. We launched the project just as the wireless markets were beginning to fall. Still, we felt that, regardless of whether or not the bloom was off the rose for this industry's stocks, that there are going to be significant opportunities for growth in the future.

TMF: One thing nobody can accuse you of doing is trying to cash in on the hype. The wireless sector is as out of favor as it has been in several decades.

Tom Taulli: Yeah, it seemed kind of odd to keep such an optimistic tone in the book all the while the markets were falling apart.

DM: I kept laughing how all the charts and examples in the book were these depictions of downward trends and share prices falling from precipitous highs. It just seemed so counterintuitive to the message. But a big advantage to writing the book was getting a historical perspective. Wireless is far from a new industry. It has been generating revenues for the past 100 years. For example, it was the sinking of the Titanic that galvanized the industry. Conceivably, all the passengers could have been saved had a nearby boat had its wireless device on."

TMF: Foolish investors know what it means to buy companies rather than stocks. Investing in a quality company means putting your faith in a management team that will make profitable decisions in good times and especially when the climate gets tough.

DM: Many people had commented to us that it was probably a bad time to be promoting wireless opportunities for investment. In researching the book though, I realized it wasn't a bad time. It was a perfect time. Like many times in history, we've seen the wheat separated from the proverbial chafe. And the wheat is currently selling at great prices. We saw the same thing in the cable industry in 1996, when people were getting out as fast as they could. As it turned out, 1996 was a pretty good time to start buying cable stocks, but at the time all of the news was bad.

TT: This does not mean you can randomly throw darts and pick winners. There will certainly be a good deal of wireless companies that will die, some of them deservedly so. Some will just make bad decisions in an industry that still promises, if nothing else, significant volatility. In Tapping Into Wireless we look at the risks and rewards. No doubt, investors need to do their homework, and although we think we know how the industry is going to progress over the next 10 years, things can change. We sought to provide the areas where we thought the most likely disruptive innovations might be.

TMF: It's like the Yogi Berra quote: "Making predictions is tough, especially about the future." What are the methods that best promise success in wireless investing?

DM: Naturally, there is no science. And, in a fast-changing market, investors' rules and assumptions need to be flexible. Investors forget that Qualcomm(Nasdaq: QCOM) was an unknown company of whiz engineers. It went public in 1991 with little fanfare and the stock was a dud -- that is, until 1999, when the company hit critical mass.

TT: We recommend that people develop a framework to answer questions and create new ones. Any successful investor will show an ability to remain flexible and skeptical, and it's no different for wireless investors. Start with the basics. In wireless, as in many technology fields, sometimes investors try to focus on the complicated without even getting comfortable with the simple. In technology, the simple generally isn't as it appears.

DM: Ask yourself: "What is the industry segment?" The wireless industry has many segments -- network operators, equipment providers, component suppliers, enterprise developers, and so on. Surprisingly, many investors don't even think of areas beyond a cellphone company like Nokia(NYSE: NOK) or service provider like SprintPCS. But all the areas are interconnected, so investors need to know how each one relates to the other, regardless of where they invest their money.

For instance, the network operators are essentially the "center of the universe" for wireless. Their direction will reverberate in every other sector. So, make sure you are not are going against the wind. A big part of our book is analyzing the different segments and showing how they relate. Without the big picture, you can't understand the forces that affect your company. A company with a great product can only do so much if the overall market doesn't show much promise.

Another good question is "What are the longstanding peer relationships?" Most wireless companies are part of -- or recently spun out from -- large telecommunications conglomerates. The business relationships and executive management in these organizations have developed working patterns that do not change easily. For instance, an equipment supplier, such as Ericsson, has a huge advantage in selling next-generation products due to longstanding relationships with carriers -- many of whom bought first and second generation equipment from Ericsson. In cases like these, Ericsson can actually have an inferior product or solution than the competitions' and yet still close a deal due to the trust developed over time between it and the customer.

TMF: Well, this leads to an interesting question. Right now the trends are nearly uniformly bad. Even the sales numbers for cellular phones has seemed to reach a plateau. How do you separate the uncertainty of today's trends and the overall long-term potential for these companies?

TT: Many investors have learned -- the hard way -- that the old-fashioned principles of business still apply. Companies need strong margins; they need sustainable competitive advantages; they need strong management; they need a strong balance sheet; they need reasonable debt levels. Of course, these go to the heart of Foolish principles! Also, opportunities in wireless are not just about high-growth in cellular phones anymore, there's lots of profitable niches we highlight in the book.

TMF: Suck up.

DM: Well, it's a major point. You look at a company like RF Micro Devices(Nasdaq: RFMD). They provide transmit-send circuits, the so-called front door for a wireless transaction. RFMD has a near sole suppliership role with Nokia(NYSE: NOK), and it provides to the other major handset manufacturers as well, capturing more than 85% of the total handset market. While the cellular and PCS markets are their bread and butter, they also provide chips for WLAN and GPS products, which are just starting to hit high gear in growth. This is a company that's done a great job growing organically with minimal debt, and its customer relationships are rock solid. While we don't make any pretense to know when the wireless market will turn around in terms of growth for cellular handsets, this is one company in it for the long haul.

TMF: Thanks to both of you for sharing some of your insights from the book. Best of luck to you!