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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Eric L who wrote (47576)10/6/2001 1:55:49 PM
From: Wyätt Gwyön  Read Replies (1) of 54805
 
thanks Eric. regarding infra royalty payments, haven't those been typically low or nonexistent? e.g., i believe Lucent has a royalty-free infrastructure license. i thought they (QCOM) tried to make all the money on subscriber terminals (razor and blades model).

The complicated part is that nobody knows with any degree of certainty what infra components QCOM gets paid on or what the percentage royalty is.

well, Jacobs is, i believe, on record saying payments are the same for 3G CDMA, inc all forms such as WCDMA, as for 2G CDMA. whether or not this is effectively the case remains to be seen.

personally, i would like to see QCOM's licensing and royalty business spun off as a royalty trust, which could deliver royalty payments to shareholders in the form of dividends. that would discourage Jacobs from blowing more shareholder money on harebrained schemes like Netzero and Globalstar. even regarding cdma2000, i believe their original projections were for something like a 40% world market share. i have doubts that they will achieve satisfactory returns on their investments there on a considerably smaller market share. the WSJ had an article a while back saying QCOM's earnings the past few years have been reduced some 30% due to writeoffs of this sort. it is a shame to see a solid royalty stream go to waste on unprofitable ventures.

a royalty trust would be more attractive to me than letting Jacobs keep the money for more ventures that will perhaps lead to future writeoffs.

i could say the same for MSFT, although IMHO they have been more successful than QCOM in their investments subsequent to their original cash-cow-establishment efforts. however, i suspect the X-box venture may be a boondoggle. i would rather see MSFT establish a dividend than blow cash on such ventures far from their core competencies.
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