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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: John Biddle who wrote (32167)	2/9/2003 7:27:17 PM
From: Jim Mullens	Read Replies (1) \| Respond to of 197809

Thanks cfoe, puzzlecraft, brational, rkral, jackmore, and JohnB for taking the time to read and respond to the annual shareholders meeting questions. I’ve made some revisions (#1, 3 , 5, 9, 12) based upon your comments/ suggestions and added a couple more questions. Again, I’ll be emailing them to IR in case they decide to answer some email questions. Since I will probably limited to asking only one or two, anyone attending that would like to ask a question is welcomed and encouraged to use any from this list. Thanks- Jim Questions for the 2003 QCOM Annual Shareholders Meeting- R3 Feb 11, 2003 1. Several news articles indicated that the MSM6300 (GSM/GPRS- CDMA2000 1X-“world phone”) chipset equipped handsets are now being manufactured and that commercial volumes will be available by mid-2003. It appears that no one in the “analyst” community or the financial media has recognized the significance of this. The MSM6300 expands Qualcomm’s market from only CDMA carriers to virtually all the world’s wireless carriers. It would appear that world wide roaming on both GSM/GPRS and CDMA networks would be the initial benefit of MSM6300 equipped phones. Secondarily, MSM6300 equipped phones would allow the GSM carriers to seed their network with dual mode phones should they later decide to upgrade to GSM1X. Recent statements from both Mr. Thornley and Mr. Keitel indicated that the incremental cost of the MSM 6300 is not significant. A. Will Qualcomm be pricing the MSM6300 so as to allow handset manufactures to aggressively market this dual mode phone and price it competitively with a GSM/GPRS single mode phone with comparable features? B. It would appear that MSM6300 equipped phones would be ideal for the Verizon / Vodafone and the Unicom replacement market. Are other GSM/GPRS only carriers also showing interest? 2. A recent article quoted the Textronic’s marketing Director as saying that ”the European GSM licenses will start to run out in 2008” and that “3G infrastructure will be significantly less expensive to operate and maintain than GSM infrastructure”. He believes the operators won’t renew those licenses and also was quoted as saying “in Europe there won’t be any GSM or GPRS services around in 2010”. This appears to be very beneficial to Qualcomm, can you comment? 3. As part of my Qualcomm Pricing Model, I track the QTL Earnings Before Tax dollars per MSM. That figure fell to $7.91 for the December Quarter, from an average of $11.46, $12.17, and $11.63 for FY 2000 thru 2002 respectively. The MSM quantity increased 45% sequentially from the September quarter. Is there a lag in the recognition of QTL royalty revenue and if so can we expect an upward EPS adjustment in the March quarter? 4. Texas instruments issued a PR last week announcing their new 3G chipset TCS4105 (GSM/GPRS- WCDMA) to be sampled in Q3-2003. Intel also recently announced their development plans for a Software Defined Radio solution for wireless. The Qualcomm MSM6200(GSM/GPRS-UMTS) sampled last June. It appears that Qualcomm has a significant time to market lead on both TI and Intel. How does Qualcomm 6xxxMSMs stack up technology/functionality/cost wise with the competition- TXN new chip and Intel SDR? 5. Reliance (India) has been in the news quite a bit recently. In a number of articles they spoke of using corDECT technology in the rural areas of India. I understand that corDECT does not require the use of a CDMA handset. A. What proportion does corDECT represent of Reliance’s wireless business plans? B. Why does Reliance plan to continue the use of corDECT in rural areas instead of 1X WLL? C. Are you aware of any future plans for any 1X use in the rural areas? 6. In your London Day presentation Tony spoke of your new revenue streams. The BREW revenue mechanics has been explained fairly well. Can you briefly explain the mechanics of the QChat, and gpsOne revenue models? A. I Recall Verizon stating at a recent presentation that Push To Talk would be available on their network by 2003 year end. B. I believe gpsOne is a chipset module that can sold separately to GSM/GPRS handset vendors. Can you disclose any gpsOne orders and unit pricing figures and could it be a significant revenue producer? 7. I read an article sometime back discussing the possibility of BREW revenue per phone exceeding royalty revenue per phone. It used KT Freetell as the basis citing their BREW revenue per phone averaging around $6/month, Qualcomm’s share at $.60/ month, times 24 months (avg phone life), equaling $14.40 per the life of the phone. Granted, not everyone buying a Qualcomm phone will be a BREW user, but is it possible that BREW could generate significant recurring revenues in the future? 8. Novatell, Gtran, and Sierra Wireless support 3G CDMA with their PC Cards for notebook computers. I understand Qualcomm chipsets are used in those products. Is there also royalty fee collected on those products and is the royalty based on the manufactures wholesale ASP of the PC Card or the notebook computer? 9. This question concerns GSM/GPRS and WCDMA royalties, cross-licenses, and the pass-thru agreements. There still appears to be some confusion after the London Day Q&A. It is my understanding that - A. Qualcomm's cross license agreements with virtually all of the major GSM vendors grants Qualcomm royalty free use of their GSM/GPRS/WCDMA IPR. B. These favorable terms also pass-thru to the handset vendors using Qualcomm's chipsets in that little if any royalty fees would be payable by those handset vendors to those same GSM/GPRS/WCDMA IPR holders which Qualcomm has signed cross-license agreements. C. The "guts" of the technology that makes the phone operate in the GSM/GPRS/WCDMA modes (radio air link, soft hand off, power control, etc) is on the MSM6200 chipset. Therefore, I can't envision why a handset manufacturer using this chipset would have to pay an additional royalty to any GSM/GPRS-WCDMA IPR holder where a royalty free cross-license exists between Qualcomm and those major vendors (MOT, NOK, ERICY, etc). D. However, there may be some royalty payable to the many smaller participants in the WCDMA IPR pool who have not crossed licensed with Qualcomm. E. Given the above, it appears that handset manufactures using Qualcomm chipsets would have a significant pricing advantage because of Qualcomm’s royalty free cross licensing agreements with the major GSM vendors. I believe Texas Instruments may provide a similar advantage as Texas Instruments has a royalty free cross license from Qualcomm. Is my understanding basically correct? 10.. A recent article stated that DoCoMo was subsidizing WCDMA handset manufactures development costs in return for a reduced wholesale handset price. Since Qualcomm’s royalty is based on the mfg wholesale ASP, could this practice reduce Qualcomm’s royalty fee from those manufactures? 11. Your presentation charts do a great job in showing the new chipsets in development and their engineering sampling dates. Is there a general “rule of thumb” as to how many months it takes to have commercial handsets available after engineering sampling begins? 12. A Gartner analyst sometime back was quoted as saying “ Those carriers that adopted GSM1x would be isolated from lucrative roaming contracts with other GSM carriers”. It is my understanding that there are no technical issues that would prevent roaming among GSM1x and GSM/GPRS networks. What was the Gartner analyst referring to? Could there be a political bias with economic repercussions for a GSM carrier who chose to “break rank”? 13. In Mr. Keitel’s most recent analyst presentation I believe I understood him to say that four analysts were estimating Qualcomm’s growth rate at 30% plus for the next several years. A number of “analysts” have much lower growth targets (including one of mine who has a 10% growth target). The growth metric I most often refer to is CDMA subscribers growing from approximately 140 million to 1 billion in five years since all known paths the 3G require some form of CDMA. That represents close to a 50% compounded annual growth rate (CAGR). Why is it that the some in the “analyst” community have such great difficulty in seeing Qualcomm’s growth potential and what more will it take to educate them of this? 14. Despite Qualcomm’s success, some feel that’s only temporary since most other companies in telecom are not faring as well and Qualcomm needs a value chain of profitable handset manufactures to succeed long term. Articles I’ve read indicate that CDMA handset manufactures are increasing production. A. Won’t CDMA handset manufactures that are currently producing 3G CDMA handsets have a significant time-to-market advantage over their WCDMA counterparts? B. The financial media generally negatively reports 3G as one entity without distinguishing between CDMA2000 and WCDMA. What more can be done to make them aware of the significant differences in the two paths to 3G and that CDMA2000 is alive and well and growing robustly?

To: John Biddle who wrote (32167)	2/10/2003 2:32:28 AM
From: pyslent	Read Replies (2) \| Respond to of 197809

"incremental cost of 6300-enabled handset over single-mode GSM/GPRS handset." I think it is worth considering that over and above the difference in chipset costs between the MSM6300 and the standard GSM chips (which I would guess would be pretty significant), any 6300-powered phone would also incur the additional QTL royalty cost. I think it is very unlikely that 6300-enabled phones will be priced competitively with the standard GSM handset. OTOH, I would not be surprised to see the 6300 canabalize 90% of all CDMA phone sales going forward, if the cost difference is low, as the talking heads at QCOM have been saying.