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Technology Stocks : Apple Inc.
AAPL 273.40-0.1%Dec 26 9:30 AM EST
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To: inaflash who wrote (69133)9/24/2007 1:40:47 PM
From: slacker711  Read Replies (3) of 213177
 
Similarly, if there is a phone royalty, they just need to set $50 or $100 as the minimum calculation cost. The IP licensing companies are very familiar with the free cell phone concept and I'm sure they've adapted well.

Qualcomm (and most other IP owners in the handset world) base their royalty on the wholesale price of the handset. Samsung sells a handset for $200 to Verizon which then allows them to set the retail price at whatever level they want. The royalty is calculated off of the $200 wholesale price even if the customer received it for free.

With Apple's model, there is no wholesale price. Apple is selling directly to the customer and then getting a portion of AT&T's monthly revenue. Right now, the royalty calculations could be based off the $399 retail price, but what happens if/when the price drops to zero? There is no minimum floor in Q's traditional royalty model. I really dont think that any of the IP holders are going to let Apple pay nothing if they are getting hundreds of dollars in backend payments.

If Apple is the one paying the royalties, there are definitely going to be some tweaks to Q's standard contract (the same is true for other WCDMA IP holders). Personally, I think it might be cleaner for Apple have their OEM deal with the IP issues, but we'll have to see how this plays out.

Slacker
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