| | | sbfm -- I don't understand why Apple would want to buy any hardware, like a modem, from Qualcomm, especially if Apple management believes they can sell their own modem, despite its inferior performance, as good enough to please its traditional customers. On the other hand, Qualcomm has an obligation under the FRAND rules to sell its products to any OEM that wants to buy them, and to sell them at a "fare and reasonable" price for each customer. Here is the scenario that seems most likely to me and justifies my continuing to hold my shares, some of which I've held for over 30 years:
1. Qualcomm will continue to sell a thin modem to Apple, as part of its business plan to provide hardware and the underlying technology to all buyers.
2. A thin modem, supplied separately to only one customer (Apple), is a special order item that would justify a higher price. Apple would probably object, and Qualcomm would then have the right to discontinue producing thin modems.
3. Meanwhile, the much larger Android community would continue getting the benefits from Qualcomm chips and reference designs, which, in my view, would more than compensate for the loss of Apple's business. Apple would still be required to pay patent royalties if any of its products practiced one claim on one patent.
4. Apple may still attempt to work around all non-exhausted Qualcomm patents, but unavoidably may end up infringing at least one claim on one Qualcomm patent, leading to another lawsuit. Qualcomm wlll undoubtedly realize they've been there and done that before and will know how to handle it.
When I say "before," I'm referring not only to the patent infringement suit Qualcomm filed against Apple, which was settled shortly after Qualcomm began presenting its case to the court. I'm also thinking about earlier lawsuits involving Ericsson and Nokia, also settled in Qualcomm's favor. Ericsson, you may recall sued Qualcomm in the eastern district of Texas, claiming the Qualcomm patents were invalid. At the Markman hearing, where you lay out your case and the court advises who likely has the strongest case, Ericsson agreed to settle. Thanks to JGoren, who reported almost daily on the proceedings, we learned how Qualcomm became the best performing stock on the S&P 500 in 1999.
When Nokia's turn came up, and Nokia decided to challenge Qualcomm's patents, Nokia settled, giving Qualcomm free access to Nokia's GSM patents, and enabling Qualcomm to become the technology leader a market that included both CDMA and GSM service providers.
Qualcomm also was able to get an acknowledgment from China that its TDSCDMA system infringed Qualcomm patents, leading to compensatory payments from the likes of Huawei for devices sold in China and elsewhere, which practiced at least one claim on one Qualcomm patent.
Resistance to Qualcomm's business plan is based mainly on Qualcomm's "free" license to make chip or related components and sell the designs to chip manufacturers (e.g., Taiwan Semiconductor, SK Hynix, Mediatek, Samsung), which can only be resold to OEM's with a licensing agreement with Qualcomm. Secondly, Qualcomm demands that you pay one fee for the entire bundle of patents, even if you only use a few. The question is whether that business plan, which contemplates licensing fees and royalty obligations, is as legitimate and sound today as it was 30 years ago. I think it is, but that's just my own view.
Art |
|
