analysts said cross-licensing of patents would whittle away its revenues to a fraction of what it would earn from CDMA2000.
I've been try to 'explain this over here for some time. Assuming QCOM can uphold the "essentialness" of its IPR and doesn't lower its rates, the QTL segment would get full boat royalties on WCDMA implementations until the expiry of "essential" patents.
The chip segment, OTOH, is going to have to x-license from other IPR holders to make DS chips. Since the Q (wisely) elected not to participate in patent pools, it will have to negotiate licensing terms with the various WCDMA essential IPR holders in order to make DS chips.
If the Q decided not to play in the DS market, and just be an IPR "tollgate" this would be very, very bad from a L/T perspective. (Essentially, the other guys might pay the tolls for a while until patents began rolling off, all the while migrating the standards, and the installed base, further and further away from the basic Q IPR.) There are other "very, very bad" consequences as well that would end up impacting the viability of CDMA2000.
It is conceivable that as a manufacturer of DS chips, Q would end up net royalty negative on chips (as, apparently, everybody else would given the number of bowls in the WCDMA soup line - but likely Q would have the lowest net royalty cost of all the DS chip makers).
A LOT OF THE FUD BEING SPEWED IS JOCKEYING FOR WCDMA X-LICENSING LEVERAGE. A LOT OF THE OLD QCOM HYPE WAS THAT IT WOULD FREE AND CLEAR NET ITS 5% TOLL ON WCDMA FAR AS THE EYE CAN SEE.
Do the math... seek the truth. Q wins - not like Wally Pie-chuck predicts, but still a quantum order of magnitude better than the Cabi view.
So, the real big questions, in order to do the math, are:
1. By say 2005, what % of the world will be WCDMA and what % CDMA2000. (Profound implications to Q).
2. What % of the DS chip business will QCOM have?
3. What will Q's net royalty position be to make DS chips?
Any reasonable set of assumptions yields a result worse than Pie-chuck's analysis, and better than Cabi's. (You could probably do a simple average of their respective price targets and come up with a reasonable intrinsic 12-month value.)
The problem with modeling intrinsic values is that since apparently much of the world trades off the latest AWSJ, Barron's, Reuters, etc. FUD-plant piece, and the note de jour of any random analyst, owning this stock requires the patience of Job and the divine ability to turn the other cheek.
Assets will, over time, find their mean value. QCOM is no exception. |
