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: Eric L who wrote (53976)	7/28/2006 7:55:12 PM
From: SKIP PAUL	Respond to of 197253

###Lucent? Nortel? LG? Samsung?### The exaples you have cited are somewhat ridiculous. You should know that Lucent and Nortel failed beacuse of the fiber bust. Their CDMA infra business saved them from extinction. Attributing their problems to CDMA is just as ridiculous as it would be to blame Nokia for leap wireless's failure and Ericssons death spiral. LG and Samsung are as much in the GSM value chain as in the CDMA value chain. Why not look at the success of Verizon Wirelss, KDDI and SK Telecom and even Nokia all part of CDMA value chain. Clearly the success or failure of individual business units will very much depend on the business models and management. It is indeed quite amazing that Qualcomma and CDMA have succeeded in the face of such strong opposition from powerful incumbents like Nokia, Ericsson AT&T and Motorola. Qualcomm does not distinguish between the WCDMA and CDMA. You may if you wish. Qualcomm gets the same amount of royalties from both and believes they will dominate in both varieties of CDMA. You may not believe them, but I do.

To: Eric L who wrote (53976)	7/28/2006 8:48:35 PM
From: matherandlowell	Read Replies (1) \| Respond to of 197253

"<< In fact Qcom's value chain is getting stronger by the day. Their growing earnings are evidence of that. >> I was hoping you would back up your opinion with some fact that would make me rethink my view" Eric, I appreciate your thoughts. You clearly have significant expertise in wireless and wireless standards and follow the companies very closely. Furthermore, I read this board not only to try to understand more about the technology and the business outlook but also to try to see good arguments as to why my current investment in QCOM (long and somewhat diminished) might not be a good idea. So I read your thoughts carefully and try to see your point of view. A few weeks ago, I challenged you or anyone else on the board to show evidence that QCOM had licensed its IP to be used in GSM/EDGE/WEDGE. As you know, the company is currently suing Nokia over this issue. I would think this would be fairly straightforward. Either QCOM licensed the IP for this standard or it did not. QCOM says the IP has not been licensed. I think the company wouldn't have gone to the trouble of suing Nokia in Federal court, the ITC, and in England if Nokia could simply show the contract where this highly valued IP was licensed to them. I think it is clear that there is no such document. Therefore, Nokia is using QCOM IP for GSM without a license. QCOM has stated that they simply wish to be paid their usual and customary FRAND rate for Nokia's use of their IP in GSM. Again, I don't see that QCOM has any obligation to accept a FRAND rate since they did not give anyone permission to use the IP for that standard. But the QCOM is trying to be nice. Clearly QCOM deserves at least their usual FRAND rate on all units sold with their IP. That shouldn't be even contested. If they do get their usual (longstanding, widely published, widely contracted and accepted) rate on all EDGE/WEDGE units, what might that do to their value chain? As I have written here, I would argue against QCOM accepting a deal with Nokia that did not extract full FRAND royalties for the GSM uses of QCOM IP and for the full FRAND royalties (established by previous contract and widely accepted and negotiated licenses) on CDMA/WCDMA. If I had my way (and I realize that no one of any material consequence is reading this board), QCOM would derive a FRAND royalty for every unit sold which uses their IP. Actually, as I read that statement over, it doesn't sound the least bit unreasonable. In other words, I don't really see a good reason the company should even "cut a deal." The law seems clear. Existing treaties require that IP not be stolen in international markets. Anyway, have a good weekend. I appreciate your thoughts on these matters but await a clear argument as to why QCOM shouldn't deserve to be paid FRAND rates (or in the case of the GSM standard, greater than FRAND rates)on the use of their IP. I'm not trying to be obnoxious, I'm just trying to understand an argument why every other company in the world gets to charge a royalty for use of their IP, but QCOM doesn't. Best wishes and with sincerity, jay

To: Eric L who wrote (53976)	7/29/2006 11:16:57 AM
From: Mike Buckley	Read Replies (8) \| Respond to of 197253

Eric, I haven't posted in a long time, probably years, but I do follow the message board daily. So, I'm going to pipe in on the discussion of Qualcomm's value chain. For me, it's probable that the relative strength of Qualcomm's value chain is increasing in WCDMA, decreasing in CDMA, and that the net overall effect is an increasingly stronger total value chain. I continue to agree with you that the CDMA and WCDMA value chains should be examined separately. For me, there is an important distinction: Though Qualcomm's control of the CDMA value chain is much stronger than over its WCDMA value chain, the realistic opportunity provided by its WCDMA value chain is much larger than its CDMA value chain. The net effect is an increasingly important value chain. I don't believe customers' earnings in and of themselves are a valid benchmark of the strength of a value chain. As one person implied, we need to determine the causes of earnings trends before concluding anything about them. As just one simple example, if the world economy goes into a recession that causes the total earnings of Qualcomm's customers to decrease, that cause-and-effect scenario is not an indication of a weakening value chain. Similarly, if macro economics cause all of its customers to enjoy increasing earnings, that is not an indication of a strengthening value chain. The single strongest evidence for me of Qualcomm's strengthening value chain is exactly what Jim Mullens repeatedly mentions -- the number of end users that will increase as WCDMA adoption spreads throughout the world. In fact, were it not for that significantly important part of the value chain, I wouldn't be a long-term investor in Qualcomm. You mention that Nokia is not a valued member of Qualcomm's value chain. I wish it were a more valued member but, for me, to say that it isn't a valued member doesn't stand up to scrutiny. If it were not a valued member, Qualcomm wouldn't be working so hard to renew the agreement that expires next year. The "hefty royalties" that you mention paid by Nokia to Qualcomm make it a valued member. Conversely, Nokia is working so hard to negotiate a renewed agreement because part of its revenues depend on Qualcomm's success. Otherwise, it would walk away from the current agreement. We won't see press releases from Nokia indicating their gratefulness for Qualcomm's success, but in the vernacular of value chains, Nokia is silently grateful. That's Value Chain 101 (not implying in the slightest that you don't already know that). I'm surprised that there hasn't been a lot more discussion about the potential impact of the upcoming ITC ruling with regard to the strength of Qualcomm's value chain. I dismiss the nay sayers that seem to ignore the importance of the recommendation given by the Court's attorney that went against Qualcomm. I've been an investor in the past in companies on the receiving end of similarly adverse recommendations. The recommendation itself clearly weakens the company's control over the value chain just as I believe has happened now with Qualcomm. Moreover, I've been told that much more often than not, the Court ultimately follows the recommendation. (Whether that statistic is true, I don't know.) If the Court does rule against Qualcomm, Qualcomm's control over its value chain will definitely be weakened. Those are just my thoughts after being a lurker for a long time. I doubt that I'll participate in any extended discussion about this, so please don't be offended if indeed this is my one and only post on the subject. Instead, be grateful. :) --Mike Buckley