On the "The Gorilla Game" mailing list, loads of uninformed people are trashing QCOM. It's an endless fight. The latest follows. How about some of you help me in responding to him:
Ron brings up an interesting point. On a similar note I have been in
contact with several of the companies that are part of the standards body
(Lucent, Ericcson, Nokia and Qualcomm). This is what I have found out.
1) When W-CDMA is made the 3G standard and rolled out it becomes free. Yes,
free. That's what a standard is, a policy set by the government to ensure
that all competitors have equal footing.
2) The only proprietary or licensable products become the individual parts
of the network (Chips, handsets, base stations). These products can be made
and sold by anyone without a licensing fee. An example of this is ATM which
is a data networking standard. Both Cisco and Lucent make switches that
work on ATM without paying anyone a licensing or royalty fee. If you don't
believe me than answer this, who gets the licensing fees from GSM?
3) What will happen is that companies will partner with each other to
provide end to end solutions. For example a manufacturer of base stations
would partner with a manufacturer of handsets. So if Qualcomm can
manufacturer or produce the parts necessary for a part of the value chain
they can benefit from that aspect but not the licensing fees.
4) As part of the recent settlement Ericcson does not have to pay royalties
to Qualcomm on current infrastructure sales. Infrastructure is much more
profitable than handsets.
5) Lucent was one of the first to do work in the CDMA field, has numerous
patents and produces chips for the handsets, for that matter so does Nokia
and Ericcson who are both building their own CDMA phones. While qualcomm
currently (before CDMA is made a standard) can force a small vendor to pay
them a fee the large companies have patents to trade. Qualcomm and others
must cross license these patents so it becomes a push.
6) A point to remember in technology, the best technology rarely wins if it
did we would all have Apple computers, run on IBM chips connecting to
networks based on Cabletron switches. Installed base and customer reach are
more important. Few clients ever want to change, even to a better
technology, after its been installed. If you don't believe that than why is
the US still not metric?
7) In terms of the market reaction I can't explain why some stocks are bid
up in the short term but if the market is always right why is Network
Associates at 16 not its high of 68, NEON at 16 not at 78, AMD at 19 not 35?
The examples are endless the market over reacts and is based to some degree
to investor sentiment. |
