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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 172.72-4.4%3:59 PM EST
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To: slacker711 who wrote (48430)11/4/2005 2:03:33 PM
From: Jim Mullens  Read Replies (1) of 196444
 
Slacker, Re: BRCM Complaint –

Thanks for bearing with me on this as I see what your referring to on page 35 of the BRCM Complaint, - Price Netting >>>>

Applying Slacker’s Comments

In your columns, change the royalty to Q for a handset with an MSM from $10 to $8.90 (($200-$22)*.05). That $1.10 in IPR savings is dependant on the handset manufacturer using a Qualcomm chipset. If they use a merchant chipset from anybody else they dont get that savings.

 

Handset			W/ Q MSM	W/O Q MSM  Delta

..Chipset
....Q Chipset Rev	$22
....BRCM chipset Rev			$22

..Handset ASP		$200		$200
...Less Q chipset ASP	($22)		$  0
...HS Royalty Base	$178		$200
...HS Royalty @ 5%....$  8.90	.......$ 10.00.....$1.10
...Effective Royalty %	  4.45%	 ......  5.00%

Chip IPR rev to Q
..Q chipset		$0
..BRCM chip IPR fee @5%			$ 1.50  

Summary
..Qualcomm Rev/ HS
....H/S royalty		$ 8.90..	$ 10.00
....Chipset Rev
......Actual Chipset	$22 		$  0			
......Chipset IPR	$ 0		$ 1.50
....Total		$30.90..	$11.50


From the above, due to the Q’s apparent “price netting” formula, the handset mfg using a Q MSM saves $1.10 on a $200 handset vs. using a non- Q chipset. This $1.10 savings amounts to 0.55% and depending how FRAND is interpreted could be considered “discriminatory”. The effective royalty rate on the total handset ASP becomes 4.45% with a Q chipset, and 5% without a Q chipset.

Possible Solutions>>

1. Eliminate the netting, and thus charge the handset mfg 5% of the ASP regardless of who’s chipset resides within the handset. A net benefit to Qualcomm of $1.50 per handset for those with a Q chipset.

2. Eliminate the netting, and thus charge the handset mfg 4.5% of the ASP regardless of who’s chipset resides within the handset. A net loss to Qualcomm of $1.50 per handset for those with a Q chipset.

3. Split the difference ** Revenue Neutral** to Qualcomm and the handset mfg. What the hey, assume the Q achieves a 50% chipset market share in CDMA/WCDMA based technologies and revise the effective handset royalty rate to 4.775% -- Everybody happy???

4. Now of course thru discovery or otherwise, we have to determine how the GSM folks have been pricing their IPR over the years. And, we may find that the Q was just following their example or even applying FRAND more reasonably.
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