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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 163.32

+2.3%

Nov 21 9:30 AM EST

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To: Eric L who wrote (25944)	4/2/1999 10:12:00 PM
From: Maurice Winn	Read Replies (2) of 152472

China and royalties It's so funny seeing China change their/its mind about cdmaOne. It was so obviously predictable. The posts are all there for all to read predicting exactly what happened. China will go on expanding GSM networks as Tero says, which is sensible because they have a lot of demand. They'll overlay them in 3 or 5 years as cdma2000/W-CDMA/WWeb become available at a reasonable price. Meanwhile, they'll be building cdmaOne flat out too. They'll use GSM/cdmaOne multimode handsets which will be in the design process now. They will have been for some time actually. Europe will be much the same. We have a lot of chickens to count in China and they'll be hatching during this year. They won't cancel cdmaOne. They only did that in the hope of helping Ericy get lower royalties agreed. The subscribers are the ones who really benefit from low royalties. 6% is fair enough for them. I reckon it's a bargain. Should be 15%. The other side of the story which has been comprehensively ignored is that huge victory represented in the royalties. Q! value represented by the royalty stream has been doubled. This is huge. Royalties were to be in the low single figures. Instead, in exchange for the chance to get into cdmaOne, L M Ericsson sold the rest of the industry, China and everyone else down the river by agreeing to an extorquerationate royalty of 5.75%. Sure, that is disappointing compared with 15% which is what it should have been [maybe]. But it is double what everyone expected. That means there was no way around the patents. It means cdmaOne was coming fast and Ericy HAD to move or be squashed. Don't expect a price reduction when the hype is over. This is not a news item of hype. This is a major revaluation of the facts surrounding Q! Mqurice

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