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To: DownSouth who wrote (28852)	7/26/2000 6:44:39 AM
From: shamsaee	Read Replies (1) \| Respond to of 54805

DS Your assumption if I may say so is not correct.All manufacturers and customers of QCOM pay a royalty plus a chipset cost.The manufacturers who are horizontal or vertical obviously do not buy chipsets and only pay royalties(this should include the INTC,TXN,MOT,NOK and ETC).Now you have the issue of those who instead of trying to develope their chipset business decide they are better off buying asics from Qcom.Then there is a royalty plus chipset cost involved.The royalties in this case are dependent on size of chipsets bought from qcom and at a certain point stop or decrease once you hit a specific volume number.This was discussed in CC of 3Q and the exact details will never be known unless you can get a copy of the samsung or mot agreement<VBG>. This is one of the underlying reasons why qcom net margins will be very high compared to spinco.If you look at the financial statement you can pretty much come to the above conclusion. Any ones comments would be welcome.

To: DownSouth who wrote (28852)	7/26/2000 6:48:15 AM
From: Don Mosher	Read Replies (1) \| Respond to of 54805

Re: QCOM Royalties DS, QCOM and SPINCO will cross-license essential and useful patents. QCOM gives SPINCO enough IPR to bargain for cross licensing with GSM IPR holders; Whereas, QCOM receives, in lieu of money, from SPINCO, the right to select future patents from SPINCO for new IPR or that extend old IPR. Thus, SPINCO pays no royalties to QCOM on their CDMA ASICS or to anyone on their CDMA/GSM ASICS. Current CDMA royalties continue as in the past, with QCOM collecting a royalty on CDMA products from their manufacturers based on their average selling price, whether: handsets, laptops, or ASICS, (anything using CDMA that requires a license also generates royalties). SPINCO sells ASICS, collecting no royalties. On handsets, QCOM collects about 4-5% of the manufacturer's selling price (I am not sure about details of MSP's with base stations or new devices). With multimode handsets, manufacturers would pay QCOM royalties for its CDMA IPR and also pay other's (about 15% to as many as 11 who own GSM IPR) their royalty percentages. The European's cross license from one another, but this cross licensing does not pass through to others. Similarly, I assume that SPINCO will cross license with GSM to avoid paying GSM royalties, but that this will not pass through to manufacturers who use SPINCO's chips. Because QCOM asserts that they will still be paid for their CDMA IPR. So, I do not believe that DS is correct when he says, "If a mfgr buys ASICS from SPINCO, they will pay no royalty fees to anyone, including GSM IPR holders." His use of "they" is possibly ambiguous. Assuming that he intends "they" to refer to "manufacturers," the manufacturers will pay; assuming that his "they" is referring to "SPINCO," they will not pay. I hope this helps. Don

To: DownSouth who wrote (28852)	7/26/2000 6:50:50 AM
From: pann1128	Read Replies (1) \| Respond to of 54805

RE: QCOM spinoff DS, Thanks for your tireless efforts here. I am not sure if anyone touched on this, but I always wondered about QCOM's insistence on having the same royalty rate regardless of how many patents were utilized by the licensee. Instead of licensing individual patents, they just issued licenses for groups of patents covering 2G, 3G etc. That arrangement obviously made the Spinco transaction very simple. Old licensees still have to pay QCOM royalty, while they need to x-license with Spinco. This also enables consistent agreements between old and new licensees. Was the QCOM management that prescient? If QCOM management foresaw this then their vision is mind boggling. The only thing unclear from the CC is how much money in the bank QCOM will get from this transaction. Someone did ask about possible dilutive effects of selling shares to the public by way of the IPO. QCOM did mention that the dilutive effects will be minimum, but no figures were given. Implication was that they were not doing it for the cash, but for strategic reasons. Even so, I guess QCOM+Spinco will come out with 1B to 2B in extra cash? Cheers, Piyush

To: DownSouth who wrote (28852)	7/26/2000 8:43:35 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

DS, Based on my understanding of the conference call and the specific response to a question asked by an analyst, the following is the scenario regarding royalties which I will refer to as licensing agreements. 1) If a company builds their own chipsets, they have to have a licensing agreement with Q. (Due to the specific nature of Spinco's cross-licensing agreement with Qualcomm, Spinco won't pay dollars but essentially it is a licensing agreement.) 2) If a company buys their chipsets from anyone including Spinco for the purpose of reselling them, they have to have a licensing agreement with Q. 3) The issue that is a little unclear to me from a logistics point of view is for the company that currently buys ASICs from Qualcomm. My understanding is that there is indeed a licensing agreement with Qualcomm that makes the purchase of ASICs from Qualcomm slightly favorable. The customer will continue to enjoy those benefits once the spin-off is complete. Though I don't understand how the details are handled, you're absolutely right that the conference call Q&A you mentioned makes it perfectly clear that for the current customers buying Qualcomm's ASICs their total costs won't increase and Qualcomm's revenue insofar as licensing is concerned won't decrease. --Mike Buckley