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

To: Eric L who wrote (47574)	10/6/2001 11:13:05 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 54805

hi Eric, do you know what the royalty situation is between QCOM and DoCoMo? is QCOM receiving royalties on their 3G phones?

To: Eric L who wrote (47574)	10/6/2001 12:02:58 PM
From: slacker711	Read Replies (1) \| Respond to of 54805

Qualcomm receives royalties on WCDMA and cdma2000 infra and while the royalties for infra are lower (as a percentage) than handsets, these royalties will be significant, because the addressable market for WCDMA infra is huge, and this will fuel Qualcomm's growth. This is one area of growth that I have never been comfortable quantifying. It seems to me that next year should see significant amounts of infrastructure being implemented (if not going live). There are so many variables on which Qualcomm has given very little guidance. Do they only collect a royalty on the basestation? the channel card? or the entire network? NTT Docomo has 500 W-CDMA basestations currently in operation. My guess is that this will increase to a 1000 by the end of the year. Unfortunately, one thing that I believe has probably gone by the wayside....Nokia's prediction that 100,000 W-CDMA basestations would be deployed this year and 300,000 next year. That would have been absolute windfall for Qualcomm. I still have the slides from the presentation but cant find the audio on their site. I wish I could relisten and make sure I am understanding that slide correctly. Slacker

To: Eric L who wrote (47574)	10/6/2001 1:59:39 PM
From: 100cfm	Respond to of 54805

Eric thanks for your unbiased and detailed response. It is very helpful in this very disappointing time of Qualcomm. I need to get some things straight in my head so a few more questions for you. Qualcomm will only become the "wireless" gorilla if cdma2000 becomes the dominant end to end technology (not just radio interface) deployed in third generation wireless, since 2nd generation wireless will most certainly give way to third generation (despite the fear and trepidation that it won't). There is no way cdma2000 will become the dominant technology. Also what do you mean by end to end and not just the radio interface. Since we both agree that wcdma will make up at least 75% of the market do you not feel Q can dominate the wcdma ASIC market in addition to dominating cdma2000 therefore becoming the wireless gorilla. We may be letting our expectations be set too high if we expect that Qualcomm has to become the gorilla of wireless, or the gorilla of 3G, in the same sense that Cisco became the gorilla of general networking, in order for it to be a fine investment - a gorilla investment. Qualcomm is the gorilla, replete with value chain, of a sustainable mass market within the broad arena of wireless. Qualcomm is a pretty unique beast. It is an established gorilla in a sustainable mass market that will easily transition generations and continue to grow. In addition it will eventually receive license and royalty revenue from the competitive technologies and companies that will dominate wireless. I already fear we've set our expectations too high and are now facing the harsh realities of Q's limitations. Who pray tell are these companies you state will dominate wireless and why. Will their technology surpass that of Q's? Sometimes, in my mind, I compare Qualcomm to Apple, Jacobs to Jobs. I would agree with this if you convince me that cdma will not be the dominate wireless technology at some future date. Qualcomm on the other hand may (most assuredly will) lose the race to dominate mobile wireless with the proprietary open architecture they control and promote ... but they will receive royalties from all the major equipment players and some of the software players that dominate wireless. Again who will they be losing to and what software companies dominate wireless now or in the future. Will not Brew put Q in this catagory? Will java win out? Qualcomm just happens to be one of the great IP players ever, and if they can get focused, and stay focused, Qualcomm is a great company to have an ownership position in. This is what I'm trying to determine. That is certainly the way the order book is shaping up. I personally think you can count on it. Depending on who you listen to estimates of eventual WCDMA market share range from 60% to 90% and I suspect it will be greater than 75%. I guess I should now ask what perscentage of the wcdma market do you envision Q taking. That is also correct. The majority of handsets sold through at least 2006 will be GSM phase 2 or GSM phase 2+ (GSM/GPRS). Why do you say 2006. Docomo has already started service and said they will introduce it in the EU via their JV in 2nd half of 02. Q just announced their wcdma chip sets for sample shipments and as I understand it commercial sales usually start 1 yr after. What is GSM phase 2?? And aren't most carriers up to the GSM/GPRS stage already and just waiting for a functional wcdma system to start deployment of their 3G systems in wcdma. I have always looked at gsm/gprs as short term stepping stone for the carriers till they could deploy wcdma. Are you saying that they will stay with GPRS intentionaly or due to lack of wcdma systems. The good news is that out around 2007 or 2008 and continuing forward through the end of the decade Qualcomm should be receiving royalties on the majority of handsets sold. Ok, so if they get a royalty on the majority and I would venture to guess that would be aprox 65-75% of all worldwide handset sales, does that not make a gorilla?? There is more good news, and it is even better, because it is of more immediate benefit . Well it's about time you got to some good news<g> Infrastructure precedes handsets (particularly in the comittee based GSM world) and 3G infra is slowly beginning a ramp right now. It will ramp sharply in 2003 and mass deployment of infra will take place between 2003 and 2007. Qualcomm receives royalties on WCDMA and cdma2000 infra and while the royalties for infra are lower (as a percentage) than handsets, these royalties will be significant, because the addressable market for WCDMA infra is huge, and this will fuel Qualcomm's growth. So if wcdma infra is beginning to ramp now why will it not begin to ramp in mass in 4th Qtr 02(one yr from sample shipments)and why will it take 6 yrs to build out. China is building a 15 million subscriber system in less then 1 yr. This is what I'm not understanding. Within 3GSM (UMTS) resides the Radio Access Network (UTRAN) and initially the UTRAN will house at least one radio interface (EDGE, WCDMA, TD-SCDMA, Satellite) or a combination of them. WCDMA will be the most prevalent. That is what I thought and agree wcdma will be most prevelant. Does not the fact that Q is now taking a more active/positive role in the 3gpp wcdma specification writings move up the time tables and give Q an edge in dominating wcdma asic sales?? TIA 100

To: Eric L who wrote (47574)	10/6/2001 1:59:49 PM
From: 100cfm	Read Replies (1) \| Respond to of 54805

Eric thanks for your unbiased and detailed response. It is very helpful in this very disappointing time of Qualcomm. I need to get some things straight in my head so a few more questions for you. Qualcomm will only become the "wireless" gorilla if cdma2000 becomes the dominant end to end technology (not just radio interface) deployed in third generation wireless, since 2nd generation wireless will most certainly give way to third generation (despite the fear and trepidation that it won't). There is no way cdma2000 will become the dominant technology. Also what do you mean by end to end and not just the radio interface. Since we both agree that wcdma will make up at least 75% of the market do you not feel Q can dominate the wcdma ASIC market in addition to dominating cdma2000 therefore becoming the wireless gorilla. We may be letting our expectations be set too high if we expect that Qualcomm has to become the gorilla of wireless, or the gorilla of 3G, in the same sense that Cisco became the gorilla of general networking, in order for it to be a fine investment - a gorilla investment. Qualcomm is the gorilla, replete with value chain, of a sustainable mass market within the broad arena of wireless. Qualcomm is a pretty unique beast. It is an established gorilla in a sustainable mass market that will easily transition generations and continue to grow. In addition it will eventually receive license and royalty revenue from the competitive technologies and companies that will dominate wireless. I already fear we've set our expectations too high and are now facing the harsh realities of Q's limitations. Who pray tell are these companies you state will dominate wireless and why. Will their technology surpass that of Q's? Sometimes, in my mind, I compare Qualcomm to Apple, Jacobs to Jobs. I would agree with this if you convince me that cdma will not be the dominate wireless technology at some future date. Qualcomm on the other hand may (most assuredly will) lose the race to dominate mobile wireless with the proprietary open architecture they control and promote ... but they will receive royalties from all the major equipment players and some of the software players that dominate wireless. Again who will they be losing to and what software companies dominate wireless now or in the future. Will not Brew put Q in this catagory? Will java win out? Qualcomm just happens to be one of the great IP players ever, and if they can get focused, and stay focused, Qualcomm is a great company to have an ownership position in. This is what I'm trying to determine. That is certainly the way the order book is shaping up. I personally think you can count on it. Depending on who you listen to estimates of eventual WCDMA market share range from 60% to 90% and I suspect it will be greater than 75%. I guess I should now ask what perscentage of the wcdma market do you envision Q taking. That is also correct. The majority of handsets sold through at least 2006 will be GSM phase 2 or GSM phase 2+ (GSM/GPRS). Why do you say 2006. Docomo has already started service and said they will introduce it in the EU via their JV in 2nd half of 02. Q just announced their wcdma chip sets for sample shipments and as I understand it commercial sales usually start 1 yr after. What is GSM phase 2?? And aren't most carriers up to the GSM/GPRS stage already and just waiting for a functional wcdma system to start deployment of their 3G systems in wcdma. I have always looked at gsm/gprs as short term stepping stone for the carriers till they could deploy wcdma. Are you saying that they will stay with GPRS intentionaly or due to lack of wcdma systems. The good news is that out around 2007 or 2008 and continuing forward through the end of the decade Qualcomm should be receiving royalties on the majority of handsets sold. Ok, so if they get a royalty on the majority and I would venture to guess that would be aprox 65-75% of all worldwide handset sales, does that not make a gorilla?? There is more good news, and it is even better, because it is of more immediate benefit . Well it's about time you got to some good news<g> Infrastructure precedes handsets (particularly in the comittee based GSM world) and 3G infra is slowly beginning a ramp right now. It will ramp sharply in 2003 and mass deployment of infra will take place between 2003 and 2007. Qualcomm receives royalties on WCDMA and cdma2000 infra and while the royalties for infra are lower (as a percentage) than handsets, these royalties will be significant, because the addressable market for WCDMA infra is huge, and this will fuel Qualcomm's growth. So if wcdma infra is beginning to ramp now why will it not begin to ramp in mass in 4th Qtr 02(one yr from sample shipments)and why will it take 6 yrs to build out. China is building a 15 million subscriber system in less then 1 yr. This is what I'm not understanding. Within 3GSM (UMTS) resides the Radio Access Network (UTRAN) and initially the UTRAN will house at least one radio interface (EDGE, WCDMA, TD-SCDMA, Satellite) or a combination of them. WCDMA will be the most prevalent. That is what I thought and agree wcdma will be most prevelant. Does not the fact that Q is now taking a more active/positive role in the 3gpp wcdma specification writings move up the time tables and give Q an edge in dominating wcdma asic sales?? TIA 100

To: Eric L who wrote (47574)	10/7/2001 12:44:33 AM
From: techreports	Read Replies (1) \| Respond to of 54805

Qualcomm will only become the "wireless" gorilla if cdma2000 becomes the dominant end to end technology (not just radio interface) deployed in third generation wireless, since 2nd generation wireless will most certainly give way to third generation (despite the fear and trepidation that it won't). I think it should be Qualcomm's mission to get CDMA2000 deployed by as many carriers as they can. This will give Qualcomm a huge advantage in the ASIC business. Because they dictate the new standards, which no one else could copy. That would be a unique benefit or competitive advantage only Qualcomm would have. Although even if Qualcomm gets say 40% of the market (carriers) to use CDMA2000, what would stop them from switching a few years later to something else? Second, it would probably be easier for Qualcomm to push BREW, however, there is nothing to stop CDMA carriers from using say Java (sprint). Latin America is the next major breeding ground and Qualcomm should get it's foot in the door quick before the GSM crowd takes over. Nokia and the other major infrastructure companies don't want to give financing to the carriers. I think Qualcomm should finance the #1 carriers in most of the larger LA markets. If the big carriers go CDMA2000, i think the smaller carriers will follow. personally, i would like to see QCOM's licensing and royalty business spun off as a royalty trust, which could deliver royalty payments to shareholders in the form of dividends. that would discourage Jacobs from blowing more shareholder money on harebrained schemes like Netzero and Globalstar. even regarding cdma2000, i believe their original projections were for something like a 40% world market share. i have doubts that they will achieve satisfactory returns on their investments there on a considerably smaller market share. the WSJ had an article a while back saying QCOM's earnings the past few years have been reduced some 30% due to writeoffs of this sort. it is a shame to see a solid royalty stream go to waste on unprofitable ventures. Ya, but their investment in Nextwave just made us 600 or so million, right? There is no way cdma2000 will become the dominant technology. Also what do you mean by end to end and not just the radio interface. Since we both agree that wcdma will make up at least 75% of the market do you not feel Q can dominate the wcdma ASIC market in addition to dominating cdma2000 therefore becoming the wireless gorilla. Qualcomm might end up dominating the WCDMA ASIC market, but that still doesn't make them a gorilla. They don't control the standard. However, this is VERY important to get the most marketshare. I'll talk more about this later on, but if Qualcomm gets like 70% of the CDMA ASIC markets (CDMA2000 and WCDMA), this makes it much easier for them to push new technologies such as BREW or Snaptrack. If these technologies become popular, then yes, Qualcomm may become a true gorilla. i could say the same for MSFT, although IMHO they have been more successful than QCOM in their investments subsequent to their original cash-cow-establishment efforts. however, i suspect the X-box venture may be a boondoggle. i would rather see MSFT establish a dividend than blow cash on such ventures far from their core competencies. Good point, even Bill Gates and company have made some bad investments. I still have lots of respect for Bill Gates and all the wealth he has created for Microsoft shareholders. I wish Bill Gates ran Qualcomm and Gemstar. ;) I try to forget about Microsoft's 5 billion dollar investment in ATT and the many other cable companies which produced nothing and many of those companies chose competing technologies like Liberates' and Java.