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Strategies & Market Trends : Gorilla Game Investing in the eWorld -- Ignore unavailable to you. Want to Upgrade?

To: Teflon who wrote (919)	12/8/1999 9:38:00 PM
From: Jay	Read Replies (2) \| Respond to of 1817

Teflon, I'm interested. It might be quite the timely investment. I really hope someone can post who knows more about IDC. But my concern is their relationship to Q. 2. cdma2000 The so-called "Qualcomm Standard", is intended to provide some of the benefits of third generation wireless while still protecting the heavy investment some telecom providers have made in Qualcomm's narrowband CDMA ("IS-95") equipment and systems, most of which are in North America and Korea. This technology does as much as possible to bring current second generation (narrowband) CDMA equipment to accept some third generation broadband features. Qualcomm has exerted tremendous political pressure (through allies in the U.S. Congress) to ensure that this is one of the final three approved international standards. Some investors, however, falsely believe that because third and fourth generation wireless standards will be based on CDMA, therefore Qualcomm will be the chief beneficiary. But Qualcomm's technology is narrowband CDMA while most of the world will adopt wideband CDMA third and fourth generation technology, which is significantly more effective for communication involving large amounts of data (Internet, conferencing, television, etc.) "Due Diligence" note on investment risks: The best technology does not always prevail. Although the odds are certainly stacked against them by a wide margin worldwide, Qualcomm has been very effective in selling their technology to 15% of worldwide users of digital wireless cell phones (almost all living in North America and South Korea). Qualcomm's powerful political clout, however, ends at U. S. shores. If anything, Qualcomm's political victories within the U. S. have hardened European and Asian resistance to Qualcomm. The world's primary digital markets are in these two continents and will continue there for years to come. Their wireless systems are universally similar and thus much more easily convertible to new technology. Both Qualcomm and InterDigital have worked harder than anyone else worldwide to develop the CDMA technology. Several years ago, in litigation between Qualcomm and InterDigital, a patent court ruled in InterDigital's favor. Qualcomm agreed to pay InterDigital over $5 million and both companies cross licensed each other for second generation (2G) useage of certain of their patent properties. But, according to telecom tech investment expert Darrell Smith (aka "Corpgold" on some message boards), the agreement does not provide for Qualcomm's transfer of InterDigital's patented technology in third generation use. That would be a very significant opening for IDC in Qualcomm's CDMA market. Instead of simply passing on to its clients the InterDigital technology it cross licensed years ago, in any third generation useage, manufacturers will now have to acquire licensing from InterDigital for IDC's part of their products technology. (The process of licensing and royalties will thus be significantly different for 3G manufacturing. Instead of acquiring licensing from one patent holder who holds all the intellectual property rights for a product, the manufacturers in the future will choose from a "cafeteria" of technologies ("mix and match") and pay royalties and up front licensing fees to several patent holders, depending on what tech they choose for their particular products. It is certainly conceivable that a wireless communications device manufacturer would choose components from five or ten 3G patent holders, depending upon their product's inherently highly complex design. The same 3G cell phone might use Qualcomm's hand-off tech, Ericsson's reception components and InterDigital's exceptionally good "triple mode" tech for interfacing TDMA, GSM and CDMA. At least initially, Qualcomm likely will claim that InterDigital's tech is not needed to accomplish a certain task and InterDigital will contest that conclusion. Rather than risk extensive litigation (IDC has $70 million set aside now for possible litigation, if needed) the manufacturer may simply pay Qualcomm and InterDigital proportionally to avoid the litigation. Qualcomm will not be happy about sharing royalties with InterDigital, but its a new 3G world now! Qualcomm is taking seriously the possibility of having to share some of its royalty income with InterDigital. In its 10K notice of November 18, 1999 Qualcomm felt it necessary to inform its shareholders that they may lose significant future licensing and royalty income to InterDigital. Here is what Qualcomm has advised its shareholders (10K, Nov. 18, 1999, pp. 15-15): "Ericsson, Motorola and InterDigital have each advised the TIA that they hold patent rights in technology embodied in IS-95 (Qualcom's CDMAone, its current 2G technology) . . . In accordance with TIA guidelines, each company has confirmed to the TIA that it is willing to grant licenses under its rights on reasonable and nondiscriminatory terms. In connection with the settlement and dismissal of the Company's patent litigation with InterDigital, the Company received, among other rights, a fully-paid, royalty free license to use and to sublicense the use of those patents claimed by InterDigital to be essential to IS-95. If the Company and other product manufacturers are required to obtain additional licenses and/or pay royalties to one or more patent holders, this could have a material adverse effect on the commercial implementation of the Company's CDMA technology." telecomtechstocks.com