Greg and all- This was posted on the Gorilla Game email goroup and I would like some help responding. How about it? Thanks to all in advance.
Caxton
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.
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