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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 174.01

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3:59 PM EST

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To: tero kuittinen who wrote (20511)	12/29/1998 1:41:00 PM
From: Clarksterh	Read Replies (1) of 152472

Tero - Even if Nokia outsources it ASICS, who do you think will pocket most of the profit from the handsets that are sold? Good question, but the answer isn't as obvious as you seem to believe: 1) Qualcomm sells ASIC for $50 (complete guess - but they are pretty sophisticated chips) which has 50% Gross Margins (another guess) for profit before op exp and taxes of $25 1b) Qualcomm gets 5% of the price for which Nokia sells the phone. At $300 this is $15 before op exp and taxes. Total is $40 gross profit for Qualcomm. 2) Nokia gets 15% gross margin on their handsets selling at $300. That's $45 gross profit for Nokia. Nokia comes out ahead for low end phones, but not by much. Of course for high end phones it's clear that Nokia will make considerably more money than Qualcomm on each individual phone sold by Nokia since the ASIC's end up being a smaller piece of the whole phone. Of course this misses the very important fact that Qualcomm gets something on every phone sold, Nokia or otherwise. Does Nokia? Clark

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