Maurice:
Unlike Philip's misplaced idealism, my perspective is based on greed and deference to the judgment of my betters (i.e. Irwin Jacobs). Qualcomm has not disclosed how much it would reduce the royalty rate in exchange for convergence, but management has assured me that the net outcome would be a far greater royalty stream then otherwise would be the case (for example, 3% of 30% worldwide marketshare is a lot less than 2% of 100% worldwide marketshare, particularly on a net present value basis).
I agree that in a perfect world, QC would simply ding the latecomers with a bigger IPR bill and merrily go on its way. But QC is trying to coalesce a worldwide group of disparate interests with an economic olive branch. At the end of the day, I trust that management is not undertaking this strategy without careful consideration. For example, let's consider a situation where QC simply licenses ERICY to do W-CDMA and collects royalties. To participate on the W-CDMA equipment side, QC would have to reengineer its ASICs, infrastructure and handsets, undertake the R&D spending for parallel engineering, and then support the disparate standards. This outcome, while still better than a world occupied by TDMA-based GSM, would be expensive and time-consuming from a product delivery standpoint. Worse, ERICY would be given a better chance of freezing the North American equipment companies out of its installed base. In contrast, if the new worldwide CDMA standard is created on QC's terms, the company would be able to preserve its entire R&D investment and rapidly begin deployment of ASICs, infrastructure and handsets virtually everywhere. Don't you think the latter outcome would be superior despite a lower average royalty rate? Management suggests that it would be and I trust their spreadsheets over mine.
Best regards,
Gregg |
