Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: slacker711 who wrote (139751)	10/31/2005 9:52:33 AM
From: carranza2	Read Replies (2) \| Respond to of 152472

Using your example, and substituting NOK in place of Samsung as a company that develops and uses its own chipsets, why would NOK join into the EEC fray? It gets the best deal of all from a royalty cost standpoint. Any thoughts? Edit: You are correct, the best cost scenario is for a company to buy directly from QCT. The "internal royalty" from QCT to QTL seems to be a transfer of cash from Peter to Paul's pockets. If you ignore it, the diference is on the order of $2, which is substantial. Using your examples, it is clear why Nokia has joined the fray. It's possible that real money is involved. PS: I hate accounting.

To: slacker711 who wrote (139751)	10/31/2005 9:59:38 AM
From: 100cfm	Read Replies (1) \| Respond to of 152472

slack I think you got scenario 1 a little mixed up. Since royalties are based on the wholsale price of the entire phone wouldn't it be more likely that Samsung would pay 5.75% on the whole 300 and then QCT would pay QTL out of the 5.57% royalty of 17.25.

To: slacker711 who wrote (139751)	11/2/2005 12:01:39 PM
From: pyslent	Respond to of 152472

I agree, subtracting the price of QCOM chipsets... ... from the the handset ASP when calculating QTL's subscriber equipment royalty constitutes a de facto royalty discount to chipset customers, and probably represents the only actionable complaint in this lawsuit. Unfortunate, because as a practical matter, the exact same money exchanges hands if the Qualcomm simply discounts it's chipsets by ~$2 and charges the handset royalty on the total ASP as it does for non QCT customers, except that this mode of accounting would have been perfectly legal. Back in the days of Spinco, Sulpezio may have given us some insight on the rationale behind this practice of price netting. IIRC, he said that handset manufacturers were resistant to the idea of paying for CDMA IPR when they were already buying the technology from Qualcomm in the form of a chipset. The spinoff was one way to resolve the perception of double charging. Once Spinco was off the table, netting out the price of the chipset when calculating the royalty was probably the easiest way to placate the complainers. In all fairness, the chipset probably should have been netted out of the calculation for handset royalties whether it was from QCT or a competitor.