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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting

QCOM 182.53

+1.3%

3:02 PM EST

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To: shoe who wrote (61201)	3/20/2007 4:54:27 PM
From: matherandlowell	Read Replies (2) of 197121

"many other companies charge half as much." Many companies charge half as much for what? The value of a patent relates to what the patent can do, not just that it is a patent. What value does the patent create for the user? The value a patent has for a user will determine what the user is willing to pay the patent owner. In this case, QCOM invented a new way to transmit mobile telecommunications: CDMA. This revolutionary approach has great value and QCOM was able to gather a large number of licensees who agreed to pay the Q 5% on handset sales. Using protectionistic techniques in the EU, Nokia was able to keep CDMA out of Europe for a long time and was able to demand that QCOM translate the revolutionary approach of CDMA so that it could be used in a GSM system. But the translation-- WCDMA-- doesn't bring any new value beyond what CDMA brought. Both use QCOM's underlying technological breakthrough. So, for QCOM, both are worth 5%. Now Nokia objects, arguing that they added a whole bunch of new patents to the CDMA standard. Because the new patents don't add any value, they should be valued at close to 0%. The difference between CDMA royalties (5%) and WCDMA royalties (x-5%) will equal the dollar amount that Nokia has been able to extract solely for protectionistic reasons, as a way to "capture" some of the royalties for Europe. If WCDMA added any new functions to CDMA then it would be worth greater royalties to Nokia, but because the patents are just add ons to allow Nokia to preserve its monopoly, the royalty amounts should be quite low. How much should Nokia be able to charge for patents which don't add any new value? j.

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