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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting

QCOM 175.59

-2.1%

2:47 PM EST

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From: JGoren	1/2/2008 7:10:28 PM
	Read Replies (2) of 196972

American Technology Research issued report on BRCM. Bank of America Qcom ATR Views order as positive for BRCM as it builds its fledging cell phone IC business and gains wider recognition for its extensive patent portfolio. Ongoing litigation with QCOM will remain overhang, ATR believes BRCM has little to lose as it is a relatively small business in cell phone ICs. End Game still about about minimizing CDMA "Tax" for Customers. Potential financial payments immaterial (4.5-6% after May 29, 2007). ATR's view is that end game is to ensure BRCM gets favorable cross-licensing terms so that its cell phone customers do not pay QCOM excessive fees or "tax" for its CDMA technologies (similar to what we are seeing from China and others). ATR believes this injunction gives BRCM additional leverage in its ongoing negotiations. ** I think it is right in believing it may help BRCM get some business; if nothing else, some handset makers might incorporate some BRCM stuff just to get them off their back. One might call it extortion. However, BRCM will remain reluctant to sue the handset makers. Believes potential customers that were reluctant to work with BRCM for fear of lawsuits from QCOM may now feel freer to work with BRCM, already seeing evidence with NOK and Samsung working with BRCM on future platforms. ** Bank of America Equity Research (Tim Long) Another Setback with Broadcom, But Limited EPS Impact. While this is another lost opportunity for QCOM to gain leverage with Broadcom, BA encouraged by the workaround for WCDMA and sunset provision for EVDO. BA believes a stay on this ruling could be delivered. Re-iterate Buy rating. US Impact only. Importantly, injunction only applies to chipsets sold to the US market. BA estimates about 10% of QCOM’s revenues coming from chipset sales to the US market, with CDMA likely ~3xWCDMA in volumes. VZ, largest end customer, is excluded. WCDMA impact. Management announced new chips that workaround the ‘686 video encoding patent and they are available today, re pin, RF and software compatible. Commercial handsets should be available by the end of March 2008, but BA thinks QCOM is probably already shipping chipsets to handset OEMs. Could be some interruption to supply but nominal EPS impact. We note that there could also be a stay on this order as the ruling is somewhat unfair to WCDMA operators where QCOM is a major supplier. CDMA impact. EPS impact of $0.02 - $0.03 to QCOM FY08 EPS. BA believes the case validates Qcom's royalty model. We view the royalty rates for the limited numbers of patents in this case as very high. With QCOM’s business model being called into question, we believe the value of providing hundreds or even thousands of patents at a 4-5% royalty rate looks a lot more palatable. BA believes BRCM litigation impact more defineda and anticipates less news going forward. QCOM remains a top large-cap pick based on rising estimates in the future and that the stock is priced based on a worst case scenario for the litigations.

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