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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Mike Buckley who wrote (28860)	7/26/2000 9:03:19 AM
From: DownSouth	Read Replies (2) \| Respond to of 54805

Merlin, if that beautiful, concise summary doesn't make the CP today, I will be disappointed. Thanks.

To: Mike Buckley who wrote (28860)	7/26/2000 9:23:55 AM
From: JohnG	Read Replies (2) \| Respond to of 54805

MB. Clearification per Steve Altman om QCOM in 10:30, 7/25 news conference. Patents have been catagorized an 1) essential and 2) helpful. QCOM will assign Spinco a portion of each while keeping a portion of each. Thus, appearantly, no company can do any flavor of CDMA without facilg both Spinco and QCOM on at least the essential patents. The math is (1/2+1/2=2) and value was created in the market place while conforming to the GSM ers little Patent Alliance game. JohnG

To: Mike Buckley who wrote (28860)	7/26/2000 12:10:46 PM
From: areokat	Read Replies (1) \| Respond to of 54805

>>Qualcomm will probably recieve at least $1 billion for the company prior to paying underwriting fees.<< Qcom's management seems to be long term thinkers so do you have any ideas on what they might be planning on doing with that cash? If they were to do a take over of a complimentary technology company, where might they go? Tom

To: Mike Buckley who wrote (28860)	7/26/2000 12:15:39 PM
From: DownSouth	Respond to of 54805

Merlin, I am getting some very thoughtful responses to my 3 questions about SPINCO = royalty or gorilla. I hope you will follow these posts and give us your opinion at the end of the day. Galahad

To: Mike Buckley who wrote (28860)	7/26/2000 1:27:41 PM
From: Jacob Snyder	Read Replies (2) \| Respond to of 54805

re: Qualcomm and Spinco: thanks for the good post. My comments: 1. I haven't heard what QCOM intends to do with the money from the IPO. Using it to buy back QCOM shares would be best. Any other use would dilute the shares I hold today. 2. This spinoff is like the Lucent spinoff, and makes sense for the same reasons. Gorillas pick the sweet spot in the value chain. They don't try to control the entire value chain, they are not vertically integrated conglomerates. The "little boxmaker" position in the value chain (Nokia, etc.) is not the sweet spot. I see Nokia evolving into a Compaq, or Dell at best. The chipset producer might be. I can't think of another industry where a pure R&D company (by itself) is a dominant position in the value chain. This (QCOM=R&D arm for wireless industry) is something new. 3. The most important relationship between Qualcomm and Spinco is that they will still have the same guy at the top. Jacobs may have to distance himself further. Like maybe just being on the board of Spinco. 4. you said, "Qualcomm right now anticipates having to enter into cross-licensing agreements with the likes of Nokia. The holders of important GSM-based patents would trade some of them in return for CDMA-based patents from Qualcomm. That lowers the net revenue Qualcomm can get for its CDMA-based patents needed for W-CDMA, and you might realize that fact has been a sore spot for many investors. This spin-off eliminates that problem." I've heard management say the same thing. I think there may be an element of wishful thinking in that. The patents and IP, and the ability to make more in the future, are going to be split between the two companies. QCOM will end up with less than what they have now. If the amount of IP QCOM has today is X, then the amount they have after the spinoff is X-Y, Y being whatever they give to Spinco. X-Y has to be less than X. If they give anything substantial to Spinco, they have to be in a weaker position to negotiate royalties. This may be a face-saving maneuver, but it may be QCOM's face that needs saving. 5. as you say, if CDMA2000 becomes the global standard, then Spinco is a gorilla. Those boardroom discussions in Europe (and East Asia) are going to conclude with, "So we have to make sure that doesn't happen, or else Spinco becomes another Intel, and we become an Apple or a Compaq." 6. Selling 10% of Spinco to Intel or TI would be an excellent strategic move. One thing that is not fully appreciated, is that marketing muscle is as important as having the best technology. QCOM is losing the political/marketing turf war of WCDMA vs. CDMA2000. That war will continue, on this and other fronts. When Spinco sits down to negotiate with Nokia, having an Intel on your side levels the playing field. Also, since Spinco is fabless, joining a world-class manufacturer would be a good fit. 7. The market basically yawned, in response to the news. QCOM bumped up against the top end of its short-term trading range (60-70), and couldn't break out. I sold (at 68 1/2) the shares I had earlier bought at 70. Still holding what I bought at 59 and 65 (10% of my money each lot), and have limit orders (10% more each buy) at 60 and 55. Not planning on selling any more, for now.

To: Mike Buckley who wrote (28860)	7/26/2000 2:14:10 PM
From: w molloy	Read Replies (4) \| Respond to of 54805

Mike wrote "Qualcomm is in a sticky position of having to sell to competitors," How are NOK and MOT in competition with QCOM today? Another way of asking the same question, why would MOT or NOK buy chips from SpinCo if they won't (directly) buy chips from QCOM? SpinCo IS QCOM sans a big chunk of IPR. SpinCo makes it easier for companies like NOK to access QCOM technology. SpinCo has just enough IPR to participate in any WCDMA patent pooling process, but it will also pay a royalty to QCOM. SpinCo becomes a 'one stop' shop. If NOK chooses to continue on its own way with WCDMA, it has to participate in the patent pool AND still deal directly with QCOM. I submit that this exersise is essentially face saving, with underlying business benefits. Jacobs said he will never participate in any patent pooling deal. SpinCo helps him achieve this. Jacobs is joined at the hip to CDMA2000. SpinCo can agressively pursue WCDMA/UMTS business, in concert with CDMA2000, but leave the promotion of CDMA2000 to it's parent. SpinCo could potentially be a better investment than it's parent. Also - QCOM becomes a great looking trading stock, especially if one studies the behavior of HP and 3COM regarding their spin-offs of Agilent and Palm, respectively.