Hi folks, I haven't posted here in quite awhile, but trying to figure out this Spinco thing has got me out of lurk mode. I have some *very* basic questions about the announcement - I realized I don't understand the Q's income as well as I thought I did.
Who pays Qualcomm when a CDMA phone is sold? For example, does Samsung now buy an ASIC from Qualcomm and *in addition*, pay a royalty to Qualcomm for use of the technology? In the future, if Nokia decides to buy ASIC's from Spinco, will they pay Spinco for the chip and also pay Qualcomm a royalty for the right to use CDMA technology in the phone?
The reason I'm asking is...if Spinco doesn't pay licensing fees to Qualcomm for ASIC's, where (from whom) will Qualcomm collect their royalties? Do they collect from the handset manufacturers, even though those manufacturers are already paying Spinco for the chip? I'm trying to get an understanding of how this will impact Qualcomms licensing revenue.
Also, in terms of valuation...in the 3rd quarter, chips sales accounted for roughly 31% of earnings, while licensing/royalties accounted for about 43%. Doesn't that mean that Qualcomm is divesting about a third of their earnings? (I don't have any projections in front of me about how the chips vs. licensing $$ should break down in the future). If the Q is valued now based on licensing *plus* chips revenue, and they are spinning off the chip biz, doesn't this decrease Qualcomm's future potential revenues, with whatever effect that will have on valuation? I realize this doesn't take into account the freedom it will give the company to follow their creative muse, expand their patent portfolio, etc. But it seems at first glance that this is a good deal for shareholders only assuming that they will have shares of *both* Spinco and Qualcomm down the line, since the revenues will now be divided between two companies.
Like I said, I don't have a very clear understanding of the technology or the business end of the deal. Any help would be appreciated.
Sam Johnson |
