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

To: Art Bechhoefer who wrote (146705)	11/30/2006 1:16:41 PM
From: golfinvestor	Read Replies (1) \| Respond to of 152472

<A company spending $100 million a year on legal costs must either have a very good set of arguments to challenge the bullies or must not have thought out the costs and benefits of alternative policies, including lower royalty rates.> I don't think lowering the royalty rate would end the war Art. The next go around, the snake NOK would want even a lower rate. The bully will continue to take your lunch money until you stand up to him. If QCOM reduces their royalties at this point the bully wins and knows just how to get what he wants. NOK started this fight and QCOM will end it one way or another. The truth is on QCOM's side.

To: Art Bechhoefer who wrote (146705)	11/30/2006 4:33:21 PM
From: Maurice Winn	Respond to of 152472

Art, you are quite right that the $5 cut in price from $1999 to $1994 might well be passed on to maintain a competitive position for a service provider. But since that's a halving of QCOM's income and a 70% reduction in profits, I don't consider such a cut would be in QCOM shareholders' interest. Yes, it would give a minuscule incentive to swap from a GSM or TDMA system to one powered by CDMA. But I don't think you'd be able to measure the change, but we could certainly measure the drop in profits to QCOM. < irrespective of the rational rate level, which would be about what it is currently,> I don't buy that idea either. I consider the rational royalty rate to be more like 40%, or maybe even 120%. That would reduce the rate at which people swap from voice-only GSM/TDMA to 3G mobile cyberspace at high speed, but overall, I think it would give a huge boost to profits. Then, as costs continue to come down and people decide to switch to CDMA systems, profits would be vast. As I have argued before, the reason $100bn was bid on spectrum was because QCOM left that much on the table to be nabbed by the next person with a choke-point on the road to mobile cyberspace. To raise QCOM income by $100bn over 10 years the royalty rate would have to be raised to about 20 times the current level. And that is just to for the undercharge in Europe, and only in 3G spectrum. They are also going to do 3G in 2G spectrum. Spectrum in the USA, Canada, China, Vietnam, Japan etc is also valuable. To extract the implied value left on the table, I guess a royalty rate nearer 200% would be needed. So, rational royalties for QCOM are NOT 4.4%. That's just the number QCOM was stuck with to try to get the CDMA bandwagon going. And they had to charge nothing to some companies. Apparently - maybe they could have stuck with it for a few more years and demanded a higher rate. Maybe they simply were not demanding enough. Mqurice

To: Art Bechhoefer who wrote (146705)	11/30/2006 4:56:53 PM
From: AlfaNut	Read Replies (3) \| Respond to of 152472

If QCOM reduced its royalties from the current range of 4 - 5% to something closer to, say 3%, it could claim the lowest royalties in the entire industry, and any argument that the rate was too high would be demolished, especially when compared to the rates charged by the GSM cabal. More important, even Nokia, with its friends among the European regulators, would still be laughed out of their offices. I disagree, and look at the Nokia / royalty rate situation differently. In my view Nokia doesn't care whether QCOM charges 3, 4, 5 or even 6% (putting aside for a moment whatever modest influence this may have on preserving GSM). What Nokia cares about is what it pays in royalties relative to its direct competition. If QCOM were to lower its royalty rate to 3% today it would still be in the same fight with Nokia that it is today. Nokia is determined, and will probably fight to the point of being one breath short of death, to preserve the highly advantageous, oligopoly-like, position it and the small group of net zero cross license participants in GSM enjoy. Losing their royalty advantage relative to the up and coming WCDMA handset manufacturers amounts to losing an important piece of their armor.