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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 174.80+0.3%Dec 5 3:59 PM EST
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To: Gregg Powers who wrote (16168)10/8/1998 9:46:00 AM
From: Techteam  Read Replies (4) of 152472
 
QCOM had royalty and licensing fees of $46 million in Q2. You estimate that $16 of that may have been for infrastructure, a number for the moment I will concede. You then state the company has disclosed that there were no licensing fees in the quarter. I can't find that disclosure in the 10-Q, but lets assume that it is correct. You then calculate that the remaining $30 million in royalties should be divided by 2.0 to 2.7 million phones to derive a $11-$15 royalty per phone. However, the 10-Q does disclose that because of a change in revenue recognition, the quarter included an extra $18 million in revenue. Thus, it isn't $30 million that should be divided by 2-2.7 but $12 million. Maybe I was too high with my $5-7 estimate.

The truth is that because of the mismatch of the timing of phone shipments and royalty recognition, the failure of the company to disclose infrastructure versus handset royalty revenue or even to break out licensing fees, calculating per phone royalties from the income statements will frequently result in misleading conclusions.

My estimate of the $5-7 per phone fees is based on my discussions not only with QCOM but with many of the firms that are licensees.
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