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

To: kech who wrote (53114)	7/3/2006 7:56:46 PM
From: Jim Mullens	Read Replies (1) \| Respond to of 197016

Ketch, Re: QCOM royalty cuts / funding IPR, etc.- Good points / discussion . Hopefully the Q can effectively make the case that its royalty element essentially enabled both 3G technologies and with an R&D team several times smaller than NOK’s. Further, by comparison NOK’s R&D expenditures (& 20,000+ R&D headcount) over the past 5 years were several times larger than the Q’s and were much less effective as their CDMA effort was abandoned and had to be written of as a total loss. Another point, I keep reading on this tread (and the 5.25 -5.75% rate in the Korean Press) that the Q’s rate is around 5%. Again, I previously used ~ 5% as my bogie. I’ve pointed out several times that Merrill Lynch’s reports IMO effectively document the Q’s handset royalty rate at 4.2%. FWIW, Modoff also suggests the Q’s royalty is in that neighborhood. Therefore,both these analysts support the Q’s recent statements that their rates are in “the low single digits”. At 4.2% (low single digits), the Q’s rate appears much more reasonable IMO, and * ~ 16% lower that what I had been using / the norm that most appear to be quoting ** ~ 25% lower than quoted in the Korean Press. So Art, you got your wish without the Q needing to take any drastic action.

To: kech who wrote (53114)	7/4/2006 7:05:34 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 197016

kech--Qualcomm is coming out with a range of chips that reduce the cost of the CDMA handsets to parity with GSM. Comparing the cost of GSM and CDMA systems is not simple. Until recently, the CDMA chips have been a little more expensive than GSM chips, partly because of lower volume sales for CDMA. I agree that new CDMA chip designs are bringing the cost of the chip to the point where there is little difference in price for low end chips for either system. The irony is that a CDMA system always beats GSM in operating cost because CDMA uses spectrum more efficiently. The other irony insofar as India is concerned is that the wireless local loop CDMA based system for rural villages is much, much cheaper to operate than even the lowest cost GSM systems. And yet, Reliance, which developed the rural WLL system, now says it would prefer to switch to GSM, knowing that GSM will cost more (and therefore may lose customers who can't afford GSM now). That's why I think that in the end, GSM will become obsolete. That said, I still believe low royalty rates can offer not only an incentive for CDMA systems but at the same time a DISincentive for expanding GSM. That is important at a time when the GSM group is putting on a hard ball public relations campaign to save their outmoded technology. As noted in a reply to my earlier message, if one accepts the Merrill analysis, then the royalty rates are actually closer to 4 percent than to 5 percent, which in itself is not high. As a large QCOM shareholder, I'd be willing to accept even lower royalty rates, if that strategy would hasten the demise of GSM. Nevertheless, I also believe that lowering royalties now is NOT the preferred action. It's like a poker game, with QCOM about to call the other side and force it to show its hand. Will the present strategy of trying to bully QCOM into lowering its rates work for Nokia? I doubt it, because Nokia cannot avoid using QCOM technology if it wishes to continue selling handsets for high speed data communications. Will the present strategy cause QCOM to lose some near term business, resulting in lower profits? No doubt, the answer is yes, but only for the near term. Will Nokia and QCOM enter into a new licensing agreement before the present one expires next April? The answer is yes, but the terms are unknown (probably close to the terms of the present agreement). Art