CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST! Message Board

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Technology Stocks : CDMA, Qualcomm, [Hong Kong, Korea, LA] THE MARKET TEST!

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Dec 26 9:30 AM EST

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To: kech who wrote (1245)	12/5/1996 2:24:00 PM
From: Maurice Winn	of 1819

Tom, good point! So it is a chess game. Ericsson have a huge marketing structure and technical expertise. They have some sorts of patents which might or might not have some value. Qualcomm have dominant patent rights to much of the CDMA necessities. It's better to have Ericsson expertise working on CDMA too - the more the merrier and the faster CDMA will take over the wireless market, increasing Qualcomm's income. There is no merit in paying lawyers to fight from either Qualcomm's or Ericsson's points of view. If they fight, it simply means they haven't correctly understood the strengths of their relative positions. It will cost them both an enormous amount if they let courts delay their CDMA progression - which is an inevitable fact of having lawyers and courts. They have to hurry up and determine each others relative strengths, using lawyers in-house perhaps, but they should do all that outside the legal system and come to an agreeement.. From Qualcomm's point of view, Ericsson are very late to the CDMA world. It will now happen without Ericsson anyway, so the people who took the big risks earlier when it was unproven have a major advantage over Ericsson who become an also ran. So Ericsson have a weak position to negotiate CDMA licence terms. Very weak. Therefore Ericsson are going to pay Qualcomm a LOT for Qualcomm's CDMA rights. Airtouch for example, an early backer, got Qualcomm shares for $4 [adjusted for share split] back in 1989. They have 10x that value less the time value of that investment. That is a measure of the extra value that Ericsson will have to pay. This leads to another method for Ericsson to get rights to CDMA technology. They could buy Qualcomm for $2.8bn at today's share price, but to get a dominant shareholding would have to pay probably $5bn. That is the value created by CDMA patents and developments. That is another guide to the upper limit on licence fees that Qualcomm can demand. Buying Qualcomm would be a clean and quick way of creating the Ericsson CDMA Division. That would give them instant full access to the CDMA world. So I think they will settle as part of negotiations, Erisson will come out of the negotiations with a very expensive licence portfolio [though still cheap compared with the value they will be getting for their business] and Qualcomm will be laughing. If I was Ericsson I would be buying shares in Qualcomm at $40. Maybe they are. I think it's great. Maurice

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