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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 165.29-2.4%3:49 PM EST
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To: Maurice Winn who wrote (146688)11/29/2006 10:28:11 PM
From: Art Bechhoefer  Read Replies (1) of 152472
 
At the risk of repeating myself in regard to royalty rates, I will put in yet another plug for LOWER, yes, LOWER royalty rates. Even though Maurice argues that the rates could easily be higher because QCOM has the best technology for general purpose application for high speed communication, I would argue that a lower royalty rate would discourage attempts to work around CDMA with systems such as WiMAX. I would also argue in favor of variable royalty rates that would be lower initially and then rise later on, as an incentive to adopt systems using CDMA technology.

The model is INTEL, during the 1990's, continually reducing the prices of its microprocessors and forcing competitors to meet the lower prices, thus depriving competitors of the cash flow they needed for additional research to get ahead of Intel. When you are the low cost producer, or when you have a performance/price advantage, you can make it more difficult for competitors to stay competitive. This strategy is in line with QUALCOMM's determination to become the R&D supplier to the entire wireless industry. Well, if that's what they want, then they should really drop their royalty rates to discourage anyone else from entering the market.

Art
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