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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 159.42-1.2%Jan 16 9:30 AM EST
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To: engineer who wrote (33043)3/4/2003 6:12:08 PM
From: Maurice Winn  Read Replies (1) of 197270
 
Engineer, when QCOM is selling radioOne, with half the bill of materials, they'll capture perhaps half of that saving. I suppose GSM can do the same, so price competition might mean QCOM doesn't gain a lot. But since CDMA is becoming increasingly popular, radioOne must make a huge difference to CDMA handset competitive position compared with GSM.

The famed 'economies of scale' which Nokia and GSM handset makers enjoy will go away when the phone is made out of plastic, a screen, an ASIC and radioOne. Halving the bill of materials is a very big deal.

I can't understand the idea of cutting royalties when it seems to me they should be going up. We halve the bill of materials, which slashes the OEM wholesale price, which slashes our royalty income. Except that we can sell the clever ASIC with radioOne for a higher price, making up the difference.

Cutting the royalty from 5% to 2% makes zero sense to me. I would put it up to 10% if I could. As you said, sales rates show the royalty isn't stopping CDMA. So does the price bid for spectrum in Europe. If royalties were higher, the service providers wouldn't have bid so much. If they were lower, they'd have just bid more.

Mqurice
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