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Technology Stocks : Qualcomm Incorporated (QCOM)
QCOM 165.03+1.0%Nov 24 3:59 PM EST
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To: quidditch who wrote (26731)4/11/1999 1:38:00 PM
From: Clarksterh  Read Replies (1) of 152472
 
Steven - do you have any idea how Q tracks its "licensees" use of these elements of Q's IPR or what the royalty rate is on handsets, no part of which is attributable to an actual ASIC sale (direct or indirect)?

No, but wish I did (Qualcomm is very closed mouth on this). But this sort of royalty tracking is not unique to Qualcomm. The other company famously doing this now is Rambus, but there are many others - in fact there is a paper at the CDG site which discusses the royalties on GSM.

Note that in the Q's Q for three months ended Dec. 27, 1998, license, royalty and development fees accounted for approximately 5% of revenues (versus 6% for the year earlier period) against 87% for sales of communications equipment (86% in the comparable 1997 period). Granted this goes straight to the bottom line.

Emphasis mine. First a nitpicking note that it doesn't actually go straight to the bottom line - they still have to pay taxes, and some of the operating costs should be 'attributed' to royalties (e.g. all that tracking you were talking about earlier <g>.) Second, any revenue 'Going straight to the bottom line' is very important when net margins are in the 3-5% range. But still and all I agree that royalties are not enough that we can be blase about, for example, handsets, which probably contribute more to gross profit than royalties.

Hope this helped.

Clark

PS On the drop in royalties as a percent of revenues, I actually expect this to pick up again as Qualcomm loses some share in CDMAOne handsets and ASIC's.
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