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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: carranza2 who wrote (139747)	10/31/2005 9:28:53 AM
From: 100cfm	Read Replies (1) \| Respond to of 152472

I think that is probably an accurate fact since Q collects it's royalty on the entire handset. So if the handset is WCDMA/GSM then they in fact are getting a royalty on GSM. The question is how much of the chipset cost is the GSM part. Most likely negligible and not worth fighting over.

To: carranza2 who wrote (139747)	10/31/2005 9:47:10 AM
From: slacker711	Read Replies (3) \| Respond to of 152472

A terrific analysis. Thanks for bringing it here. Agreed...it is a nicely articulated look at the case. Nomura sagely points out a couple of things: Q has reiterated that the differences are negligible except for China and then only with respect to internally consumed chips. Like probably most here, I have little problem believing that Q's public statements re: negligible differences existing are true. Seems like Broadcom and others simply want to test the validity of that information, and build a case around the possibility that Q is less than honest about its public pronouncements. Harass Q, in other words. Qualcomm has acknowledged at various points that there is a small difference in the royalty rate between those who use Q's chips and those who dont. Broadcom was the first to actually reveal the mechanism that I know of. I think it is worthwhile to set out the 3 different scenarios for royalties and chipsets. I'll use Samsung as an example. 1) Samsung buys a WCDMA chipset for $30 from Qualcomm and puts into a $300 WCDMA/GSM handset. QCT pays QTL a royalty rate of 4.3% (by my calculations) on the $30. Samsung pays a 5.75% royalty rate on the other $270. External royalties of $15.80. Internal royalties of $1.29. Total QCT royalties of $17.09. 2) Samsung buys a WCDMA chipset for $30 from Broadcom and puts it into another $300 WCDMA/GSM handset. I assume that Broadcom has the same royalty rate as QCT (though it could be higher)....so they pay $1.29 to QTL. Samsung then pays the 5.75% royalty on all $300....or $17.25 to QTL. External royalties of $18.54. 3) Samsung develops an in-house WCDMA chipset. They put it into a $300 WCDMA/GSM handset. The 5.75% is again owed on the entire price of the handset so they pay $17.25 to QTL. External royalties of $17.25. Basically, if a customer buys a chipset from QCT, it is sort of treated as if they had developed the chipset internally. OTOH, a licensed ASIC seller is treated a bit differently. Is it substantial? That probably depends on your definition, but I do think a case can be made that Q isnt treating all licensees the same. I agree with Nomura that the rest of the allegations seem overblown. Slacker