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To: Dealer who wrote (24366)	12/12/2000 9:35:23 AM
From: Dealer	Read Replies (2) \| Respond to of 65232

QCOM--Qualcomm to Take $80 Million Charge Due to Ruling on Cell-Phone Royalties By Pui Wing Tam Staff Reporter of The Wall Street Journal Qualcomm Inc. said an arbitration court ruled that it must share royalties with a South Korean research institute for sales of some cellular-phone equipment there, causing Qualcomm to set an $80 million charge for its current quarter. The ruling by the International Court of Arbitration in Paris ordered Qualcomm to share royalties with the Korean Electronics and Telecommunications Research Institute, or ETRI, based on Qualcomm's South Korean sales of specific equipment based on the technology known as Code Division Multiple Access, or CDMA. In addition to the charge for past equipment sales, to be taken in the fiscal first period ending Dec. 31, Qualcomm said it will also make continuing payments of around $4 million a quarter to ETRI depending on future sales of CDMA equipment in Korea. The ruling "is disappointing," said William Sailer, vice president and legal counsel at Qualcomm. "But this doesn't hurt our abilities to get royalties anywhere else." The dispute between Qualcomm and ETRI dates back to 1998, when they disagreed over a deal that had been signed in 1992, where both had arranged to share royalties and jointly develop CDMA equipment in Korea. In the dispute, ETRI charged that the 1992 agreement covered Personal Communication Services equipment, and that Qualcomm should also share royalties from these PCS sales. Meanwhile, Qualcomm argued it didn't need to share royalties from sales of PCS equipment since it believed the 1992 agreement covered just digital cellular equipment and not PCS sales. Analysts played down the news of the ruling. "For Qualcomm, anytime you have to give up money it's not a positive," said Brian Modoff, an analyst at Deutsche Bank. "But the ruling only affects 2% of Qualcomm's royalty revenue a quarter." Added Mark Roberts, an analyst at First Union Securities, "The ongoing impact of this is minor -- it doesn't affect our models at all." In its fiscal 2000 first quarter, Qualcomm reported revenue of $1.1 billion, and net income of $192 million, or 25 cents a diluted share. Still, the court's decision sent Qualcomm's shares down $3.75 to $99.50 in 4 p.m. Nasdaq Stock Market trading Monday.