corpgold's response to briefing.com's IDC vs. QCOM thing: From Raging Bull:
By: corpgold
Reply To: 38898 by bjp1946
Thursday, 13 Jan 2000 at 10:51 AM EST
Post # of 39812
"CDMA made giant steps against the dominance of GSM phones (the acceptance by
China of CDMA helped this a
lot. Previously China was an all GSM wireless infrastructure, and there was essentially
no CDMA infrastructure at
all. )"
There still is no CDMA infrastructure at all in China to speak of. It remains all GSM.
China is even considering the less costly TDMA buildout for the rural areas. If you
contact the UWCC, the TDMA organization in the U.S., you will find this to be true. This
phrase in itself is a departure from what is really going on in China. China's rural areas
could still go TDMA if China Telecom has it's way. TDMA is cheaper than CDMA and
may meet their rural needs. Latin America made the TDMA decision based on
reviewing many of the same variables. TDMA and GSM are both evolving rapidly to
compete with CDMA like features; principally through the art of WCDMA.
"The acceptance by China Unicom of CDMA, and their
announcement of plans to build a CDMA infrastructure with 40 million user capacity,
came one day after the
settlement with Ericsson was announced. We don't think the settlement was a
coincidence. Ericsson was/is the
dominant vendor in China, but any move to CDMA would hurt them."
Unicom has been stating that they've had CDMA plans for China for over two years.
They've been conducting trials for both BCDMA (fixed) and CDMAOne (mobile -
Samsung). If you check ChinaSouth Post news for the years prior to the Unicom
announcement you'll find other CDMA announcements by Unicom claiming they could
build 3 million person structure but needed capital infusion to do so. The 3 million
became 40 million - and so on. Some of this is bluff to get financing. They still do not
have the capital and only plan to go public late this year to obtain the capital. The
Chinese Government has not "officially" approved of Unicom's plans to date. China
Telecom controls 97% of the structure their and it is CHINA TELECOM THAT WILL
MAKE THE FINAL DECISION NOT THE SMALLER UNICOM.
"The moniker "baby Qualcomm" began being applied to IDC because IDC is
essentially an intellectual property
engineering firm. In the same way that Aware (AWRE) and fabless semiconductor
companies develop technology, then
license the manufacturing to others, IDC's business model involves development and
licensing of new technology. They
do not manufacture or distribute physical product on their own."
TURE, SO WHAT'S HIS POINT?
"The problem with IDC, which is where our "tire-kicking" comes in, is that the expected
royalty stream coming to IDC is unproven. The current royalty stream is based on
existing TDMA and CDMA license agreements, but a quick glance at IDC's quarterly
revenue stream shows that that stream is dying, not growing."
UNPROVEN? You must be kidding! They have 22 TDMA/GSM licensees, all of which
begin paying concurring royalties this year and next! IDC's royalty stream from these
licensees will grow nearly 1800% this year over last - by IDC's own admission. That
stream, as more "up front payment" licensees come off line and begin paying per
phone royalties will double again in 2001. He needs to check his numbers. He
obviously did not do that.
"Premise 1: Qualcomm pays IDC royalties because IDC owns CDMA patents. IDC
does own CDMA patents. But
Qualcomm and IDC settled any ownership dispute over these patents in 1994 with a
single one-time payment to IDC
from Qualcomm and a perpetual license agreement. IDC receives no current royalties
from Qualcomm on an ongoing basis. Numerous emailers to us claimed that they do.
Where this idea comes from, we have no idea. Even a brief look at IDC's revenue
stream should convince anyone that
they aren't participating in the boom that Qualcomm enjoyed. Nevertheless, we asked
both companies and both IDC and Qualcomm verified that no current royalty
relationship exists between the two companies."
No CURRENT stream. We're not talking CURRENT stream, we're talking CDMA2000
stream. It is Qualcomm's intent to move all current CDMAOne systems to CDMA2000.
It is ths 3g standard under which IDC's IPRs will receive patent payment. One patent,
reverse pilot, is being utilized by Qualcomm in their CDMAOne systems and is being
transferred to CDMA2000. There are others. He needs to check his IMT2000 facts. IDC
has patents in ALL FIVE STANDARDS AND WILL BE PAID IN ALL STANDARDS.
Premise 2: Qualcomm will pay IDC royalties in the future for 3G CDMA phones,
because the 1994 lawsuit does
not cover technology needed for 3G phones. IDC does own patents on B-CDMA
technology, which is not covered by the 1994 settlement. But this is irrelevant to
Qualcomm's future. Qualcomm stated unequivocally to Briefing.com that they "don't see
any need for Qualcomm to use any existing IDC patents in the future" and that they "do
not expect to pay IDC royalties" going forward. It can't be any clearer."
This is not IDC's view, nor is it the view of the IMT2000 standards committees in which
Qualcomm and IDC participated. Goldberg stated himself that IDC owns patents in all
five standards. Qualcomm knows 100% that they are utilizing IDC's patents. Notice that
he doesn't quote anyone DIRECT at Qualcomm, NOR DOES HE QUOTE
QUALCOMM'S 10k WHICH CLEARLY STATES THAT IDC CLAIMS PATENTS FOR
CDMAONE IN USE.
'Premise 3: Everyone building a 3G phone will pay IDC a royalty in the future. This
premise is based on the idea
that IDC owns essential patents for the 3G standard. IDC is developing technology for
the 3G standard, but so are many others. IDC has not identified to ITU any specific
patents that would require royalty payments, to anyone, not just Qualcomm. (Source:
Both IDC and Qualcomm.). Such
an assertion would be standard procedure for any vendor submitting technology to an
international standards board. Any presumption that IDC will own royalty-bearing
intellectual property for 3G technology that is sanctioned by ITU is currently just a
presumption."
Is currently just a presumption...this is completely boldface lying in my view. He does not
name the source with which he spoke at Qualcomm nor at IDC. Nor has this man
spoken to those who participated in the conference. Two IDC VPs were on the five
committees which were determining patent inclusion. The actuality is that the ITU has
not PUBLISHED THE IPRs FOR SUBMISSION for declaring "essentiality". IDC HAS
CLEARLY STATED THEY HOLD ESSENTIAL PATENTS WHICH WERE
SUBMITTED ARE BEING SUBMITTED TO THE ITU FOR INCLUSSION AS
ESSENTIAL. HOW CLEARER CAN ONE GET THAN THIS?
"Premise 4: Every current GSM and TDMA phone vendor owes IDC money for past
infringement and it amounts
to billions. This idea falls into the "maybe" category. It stems from the idea that the
current Ericsson/IDC cross lawsuits are going to result in a judgement for IDC, and that
back royalties will be awarded. The idea is exciting because of the vast amount of
phones sold which are claimed under the lawsuit."
THE MAYBE CATEGORY. This MAN knows ABSOLUTELY nothing about TDMA/GSM
patents nor does he know anything about the dispute under which the ERICY/IDC fight
is all about. The dispute between IDC and ERICY is regard to the bases of all TDMA
systems in operation - not just a few patents here and there. IDC HAS CLEARLY
STATED THAT IF YOU'RE USING TDMA AND NOT PAYING YOU ARE IN VIOLATION
OF IDC'S PATENT OBLIGATIONS. NOKIA SETTLED UNDER THE SAME
GROUNDS THAT ERICY IS BEING SUED! WHAT MORE DOES THIS MAN WANT?
"But prejudging the outcome of any lawsuit, with your investment dollars, is a very risky
proposition. Furthermore, the trial schedule is not expected to conclude, according to
IDC, until the end of 2000 or early 2001. The April date that numerous emailers pointed
to is only a hearing, with a single judge, and will not result in final disposition of the
case. An investment on this premise requires at least a year's time frame."
This is true, but obviously based on trial dates that are under the current framework - all
of which can change. All the big Asian TDMA players, including Nokia, have settled with
IDC. I would like this man to develop a credible argument based on all the current
known facts surrounding the case why ERICY will not come to the table. The reason a
settlement is 85% likely is that ERICY wants to buildout it's 3g systems without ITU
strings attached relative to current 3g TDMA proposals.
"Furthermore, even if IDC wins, there is no assurance that the royalty payments would
amount to "billions." But even a judgement in the hundreds of millions wouldn't justify the
current market cap of IDC, in our view, if it were a one-time payment."
The man doesn't know which patents are involved, how these patents are compensated
concurrently to other vendors, nor what IDC is due upon a win.
"Many people emailed us saying that a judgement for IDC was a given, since the Patent
Office recently reaffirmed
existing IDC patents. But a reaffirmation by the Patent Office is a nonevent, in patent
litigation. When patents are overturned, it happens in court, not by the Patent Office. A
reaffirmation is obviously a positive sign,
but it does not mean that the IDC patents cannot be declared invalid."
When patents are overturned it happens based on markman hearings - a three judge
panel which reviews all the patent information at hand. 98% OF THE TIME THE
MARKMAN HEARINGS AGREE WITH THE PATENT OFFICIAL WHO APPROVED
THE PATENTS. IN IDC'S CASE THE PATENTS HAVE BEEN SUBMITTED TWICE -
APPROVED ONCE, APPROVED AGAIN. WHY IS THE FIGURE 98% SO HIGH?
BECAUSE THE PATENT OFFICAL DOES MUCH OF THE TESTIFYING ON BEHALF
OF HIS PATENT APPROVAL PROCESS!
"Premise 5: IDC is currently receiving royalty payments from Nokia, and will in the
future. Numerous people
stated that Nokia is already paying IDC in the neighborhood of $40 million in royalty
payments for IDC intellectual property, and therefore IDC will receive something for
every 3G Nokia phone going forward. Nokia has contracted with IDC for technology
development that might be part of Nokia's 3G technology. The bulk of
the Nokia payments so far represent development costs, although the payments also
include a prepayment of licensing rights to a limited extent. This was verified by
Briefing.com directly with IDC, although IDC would not comment on any possible royalty
relationship into the future, or the terms, if any, of future royalty payments Nokia might
make."
THERE IS NO MIGHT FRIEND! NOKIA IS UTILIZING IDC IPR BLOCKS
TECHNOLOGY FOR A SPECIFIC PART OF THEIR 3G PLATFORM. This isn't a
question of maybes, IDC's has 150 engineers that have been committed to Nokia
around the world producing these products. Does he think that at the last minute after all
the input and WCDMA tests both in China and abroad that Nokia is going to declare
IDC's IPRs invalid? This man is short. I see no other purpose in his continued rebuttal
regarding IDC.
"Possibilities For IDC
While we think the "baby Qualcomm" concept is an erroneous way to look at IDC, it
doesn't mean that IDC isn't a
possible speculative play.
Here are three real possibilities to justify an investment in IDC, but everyone of them
currently has no proven revenue stream."
Oh PLEASE! NO CURRENT PROVEN REVENUE STREAM! THE MAN HAS
TALKED TO IDC AND DOESN'T FOLLOW TDMA SALES AROUND THE WORLD
FOR GOD'S SAKE! This is just sickening.
Chip sales: IDC is currently working with Texas Instruments to develop B-CDMA chips.
IDC is also looking for additional relationships with semiconductor manufacturer to
build IDC designed chips. This "fabless"
semiconductor relationship is an established model in the semiconductor industry. But
it requires demand for IDC
designs. Unfortunately, there is not, to date, an established stream of revenue from sale
of these chips upon which to formulate an estimate of market demand."
Yes there is friend. What does he think IDC is doing with Nokia? The same building
blocks that are going into the Nokia products are going into the ASICS which IDC is
producing. These same ASICS will be co-marketed by both companies; including TI.
Nokia relationship: The Nokia relationship has possibilities. But since a future royalty
stream can't be confirmed..."
My God. How many 3g products does this man think Nokia will sell around the world?
He can not confirm the 3g product base because he doesn't understand what is going
into the Nokia platform and IDC is not willing to publically say due to the agreement with
Nokia at the present time.
"But IDC will own the intellectual rights to any technology they develop for Nokia,
meaning they can license whatever they develop to anyone else. That is a good
position to be in, but it doesn't mean that anyone wants, yet, what IDC owns."
Oh, yes it does. Nokia is using the techology, the IPRs are included as essential in the
IMT2000 platform which being established as we speak, what more do these people
want. They mish mash words and come to absolutely no meaning. NTT is utilizing IDC
technology. If he had been in Japan last month he would have found this out.
"The Ericsson suit: It is always possible that IDC will receive a large settlement for past
patent infringement. But without knowing what IDC would do with the money, it is a
lottery ticket with an unknown payoff. All it really
means is IDC would have no capital problems. But that doesn't guarantee future
earnings."
A lottery ticket. Dear Lord. The man doesn't know any of the patents involved. He has
never studied the case. He is not qualified to speak on the case relative to the patents
but he IS WILLING TO CALL IT A LOTTERY TICKET.
"We aren't alone in being uncomfortable about an inability to quantify IDC's future
business plans. The sole analyst
covering IDC, Ram Kasargod, of Morgan Keegan, dropped coverage on 1/11/00
because no details of possible revenue
streams were available, upon which to base a valuation."
HE OBVIOUSLY HAS NOT FOLLOWED RAHM'S COMMENTS FOR THE LAST
FOUR YEARS. RAHM HAS MISSED EARNINGS BY 40% EACH YEAR. RAHM
PREVIOUSLY PREDICTED NO PROFIT FOR BOTH 1998 AND 1999, AND ONLY
CHANGED HIS ANALYSIS AFTER EARNINGS.
"But we believe that any investment needs to be analyzed on a risk/reward basis. With
IDC, it is rather easy to calculate the risks, but nearly impossible to calculate the
rewards."
He has neither calucuated the risks nor the rewards. The risks are not what he says they
are; nor are the rewards calculated properly because his risks mentioned are incorrect.
"Qualcomm, on the other hand, is not a speculative investment in any way, although you
might argue about the valuation...we have a feeling that most who bought on the "baby
Qualcomm" concept never really understood IDC."
HE TRULY BELONGS IN THE CATEGORY OF THOSE WHO STILL DON'T GET IT.
This guy has an ego the size of Texas.
I would like this man to tell us what his telecom creditials are in evaluating any
telecommunications stock. What his educational background is. The number of years
he has spent studying the Qualcomm and IDC issue. I can guarantee that this man has
only briefly studied the issues and has come to these monumental conclusions based
on a one nights stand of study.
His entire article does make one angry. He admits to knowing much of what he doesn't
already understand, yet he is willing to make comments on these subjects. |
