All- I've prepared the following questions for the shareholders meeting on Tuesday. Any comments, additions are welcome. I will probably be limited to asking one or two. Anyone attending the meeting who cares to ask a question from this list is welcomed to do so.
Jim
Questions for the 2003 QCOM Annual Shareholders Meeting- R1 Feb 11, 2003
1. Several news articles indicated that the MSM6300 (GSM/GPRS- CDMA2000 1X-“world phone”) chipset equipped handsets are now being manufactured and that commercial volumes will be available by mid-2003. The MSM6300 expands Qualcomm’s market from only CDMA carriers to virtually all the world’s wireless carriers. Will Qualcomm be pricing the MSM6300 in such a manner to allow it to be aggressively marketed as a replacement/ upgrade handset choice for Unicom and Vodafone and other carriers who operate both GSM and CDMA networks?
2. A recent article quoted the Textronic’s marketing Director as saying that ”the European GSM licenses will start to run out in 2008” and that “3G infrastructure will be significantly less expensive to operate and maintain than GSM infrastructure”. He believes the operators won’t renew those licenses and also was quoted as saying “in Europe there won’t be any GSM or GPRS services around in 2010”.
This appears to be very beneficial to Qualcomm, can you comment?
3. As part of my Qualcomm Pricing Model, I track the QTL Earnings Before Tax dollars per MSM. That figure fell to $7.91 for the December Quarter, from an average of $11.46, $12.17, and $11.63 for FY 2000 thru 2002 respectively. The MSM quantity increased 45% sequentially from the September quarter. Is there a lag in the recognition of QTL licensing revenue?
4. Texas instruments issued a PR last week announcing their new 3G chipset TCS4105 (GSM/GPRS- WCDMA) to be sampled in Q3-2003. Intel also recently announced their development plans for a Software Defined Radio solution for wireless. The Qualcomm MSM6200(GSM/GPRS-UMTS) sampled last June. It appears that Qualcomm has a significant time to market lead on both TI and Intel. How does Qualcomm 6xxxMSMs stack up technology/functionality/cost wise with the competition- TXN new chip and Intel SDR?
5. Reliance (India) has been in the news quite a bit recently. In a number of articles they spoke of using corDECT technology in the rural areas of India. What is the relationship between corDECT and CDMA and does corDECT also require the use of a CDMA handset? If not, what proportion does corDECT represent of Reliance’s wireless business plans?
6. In your London Day presentation Tony spoke of your new revenue streams. The BREW revenue mechanics has been explained fairly well. Can you briefly explain the mechanics of the QChat, and gpsOne revenue models? I believe gpsOne is a chipset module that can sold separately to GSM/GPRS handset vendors. Can you disclose any gpsOne orders and unit pricing figures and could it be a significant revenue producer?
7. I read an article sometime back discussing the possibility of BREW revenue per phone exceeding royalty revenue per phone. It used KT Freetell as the basis citing their BREW revenue per phone averaging around $6/month, Qualcomm’s share at $.60/ month, times 24 months (avg phone life), equaling $14.40 per the life of the phone. Granted, not everyone buying a Qualcomm phone will be a BREW user, but is it possible that BREW could generate significant recurring revenues in the future?
8. Novatell, Gtran, and Sierra Wireless support 3G CDMA with their PC Cards for notebook computers. I understand Qualcomm chipsets are used in those products. Is there also royalty fee collected on those products and is the royalty based on the manufactures wholesale ASP of the PC Card or the notebook computer?
9. This question concerns GSM/GPRS and WCDMA royalties, cross-licenses, and the pass-thru agreements. There still appears to be some confusion after the London Day Q&A. It is my understanding that -
A. Qualcomm's cross license agreements with virtually all of the major GSM vendors grants Qualcomm royalty free use of their GSM/GPRS/WCDMA IPR.
B. These favorable terms also pass-thru to the handset vendors using Qualcomm's chipsets in that little if any royalty fees would be payable by those handset vendors to those same GSM/GPRS/WCDMA IPR holders which Qualcomm has signed cross-license agreements.
C. The "guts" of the technology that makes the phone operate in the GSM/GPRS/WCDMA modes (radio air link, soft hand off, power control, etc) is on the MSM6200 chipset. Therefore, I can't envision why a handset manufacturer using this chipset would have to pay an additional royalty to any GSM/GPRS-WCDMA IPR holder where a royalty free cross-license exists between Qualcomm and those major vendors (MOT, NOK, ERICY, etc).
D. However, there may be some royalty payable to the many smaller participants in the WCDMA IPR pool who have not crossed licensed with Qualcomm.
Is my understanding basically correct?
10. A recent article stated that DoCoMo was subsidizing WCDMA handset manufactures development costs in return for a reduced wholesale handset price. Since Qualcomm’s royalty is based on the mfg wholesale ASP, could this practice reduce Qualcomm’s royalty fee from those manufactures?
11. Your presentation charts do a great job in showing the new chipsets in development and their engineering sampling dates. Is there a general “rule of thumb” as to how many months it takes to have commercial handsets available after engineering sampling begins?
12. A Gartner analyst sometime back was quoted as saying “ Those carriers that adopted GSM1x would be isolated from lucrative roaming contracts with other GSM carriers”. It is my understanding that there are no technical issues that would prevent roaming among GSM1x and GSM/GPRS networks. What was the Gartner analyst referring to? |
