Very Astute Observation>
Handset royalties...
by: Explorer_at_large (36/M/Southwest)
37992 of 37992
T-W-A: royalties are paid by the manufacturer based on the transfer price to the carrier...carriers therefore
fund the royalties implicitly, but not explicitly.
The acquirer of QPE et al will be motivated by strategic interest rather than pure economics, i.e. the acquirer
will most likely be a large, well capitalized telecom company that currently is NOT participating in the North
American CDMA handset space. The purchase of Qualcomm's business unit, overnight, would yield high teens
marketshare and make the company a 'player' in the market. Several Japanese, European (and even Korean)
companies come to mind. Presumably such companies will bring manufacturing scale and supply chain access
that was unavailable to Qualcomm. This will why they will buy they thing...as for Qualcomm...the chance of it
allowing somebody to produce CDMA equipment without paying royalties is on par with the likelihood of the
company buying a semiconductor fab...which is another way of saying, the odds are equivalent to Clinton
taking an oath of celibacy AND LIVING UP TO IT, i.e odds<=0. Handset royalties are the KEYS TO THE
CDMA KINGDOM...and management ain't gonna safe harbor a royalty-free participant...no how, no way...it
would make more sense to shut the business unit down!
By the way, you all let me off the hook with a profound arithmetic goof vis-a-vis my earlier post. Qualcomm's
handset capacity is in excess of two million units per quarter (not per annum). So the ASIC volume would be
eight million units, revenue would be closer to $200 million, and the incremental ASIC margin would be closer
to $60 million. When coupled with the 3.5% royalty, this implies operating income circa $130 million versus
something presently one-third of this amount. |
