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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Brian K Crawford who wrote (889)3/30/1999 12:28:00 AM
From: Mike Buckley  Read Replies (1) of 54805
 
Brian,

Will QCOM net more manufacturing a complete phone than they would receive on the royalty when one of the big 3 builds it?

I wasn't able to find the answer to that question in the 10K. The income statement doesn't provide enough detail.

When you look at the income statement you'll notice that royalties are a relatively small part of the revenues. When a competitor builds a phone they might be using CDMA technology and/or they might be purchasing an ASIC from Qualcomm and/or they might be purchasing an ASIC from from one of the six manufacturers licensed by Qualcomm. My point is that even though someone else makes the phone, Qualcomm might be generating more than royalties.

Are there strategic reasons they need to remain in the handset biz?

I've been wondering that too. Intel and Microsoft don't manufacture computers, so I have to wonder why it's important for the Q to manufacture handsets. I wonder, in the early days of CDMA techology usage, if it's important that the Q makes their own handsets as one way of proving the technology's commercial viability.

One thought to conisder is that their exposure is somewhat limited. Sony shares the exposure through their joint venture. Also, Sony Electronics buys a lot of the handsets made by the joint venture.

--Mike Buckley
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