Jon..Jon.. read the Herald more carefully. The story plainly states that QC has paid ETRI all the royalty-sharing payments required for cellular-related CDMA equipment and that the difference of opinion is over PCS-related products.
As I noted in my previous explanation, QC believes that its contract with ETRI is quite specific and that it excludes everything but cellular from the royalty-sharing requirement. ETRI is arguing that since PCS and cellular are so similar, this is unfair and that QC should cough up more money. QC's position is that contractual terms are contractual terms and that you just cannot rewrite the deal seven years later because the deal is suboptimal.
Cabi's distortion of the Herald story is grotesque. To quote from his note "Korea Herald suggests that Qualcomm may face a lawsuit from the Electronics & Telecommunications Research Institute (ETRI) for neglecting a contractual obligation to pay 20% of all Korea-derived CDMA REVENUE (caps are mine). Though it is too early to conclude what will happen, a successful lawsuit could mean a restatement in QCOM's royalty stream, and more significantly, could negatively impact future royalties"
Despite the sly attempt to stop short of actionable slander (i.e. "it is too early to conclude...), Cabi clearly is shouting "FIRE" in a crowded theater when he writes that QC will owe the Korean government 20% of all its domestic Korean REVENUE and that this could force the company to restate its P&L. Remember, we are not talking about some $25,000 per year staff reporter....we are talking about an extremely sophisticated, highly compensated Wall Street analyst who read the Herald story and would clearly understand the difference between REVENUE and ROYALTIES and also would clearly differentiate between the payments made (on cellular royalties) versus payments not made (on PCS royalties). Moreover, I can think of no interpretation of the Herald story that would necessitate QC to restate its earnings (and, BTW, neither can Qualcomm management). Finally, Cabi makes no attempt to provide QC's view on the dispute...which, by the way, is that QC has performed entirely within the terms of the contract and therefore has no liability for further payments.
I cannot think of a more clear-cut example of Cabi's blatant anti-Qualcomm bias. This is so blatant that I have asked our in-house counsel to review this situation to see if violates the SEC's 10b-5 regulations.
Best regards,
Gregg |
