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

To: ohohyodafarted who wrote (59115)	1/25/2007 11:04:12 PM
From: kelseysuncle	Respond to of 197351

Just wanted to say that I appreciate the discussion of the Nokia license agreement. I want to add that it is probably not only the royalty rate that is under dispute but also the license fee. Since sometime in 2001 when the accounting rules for recognition of revenue from up front license fees changed, QCOM has not included what used to be a standard phrase in its PRs regarding license agreements. For instance, in October 2000 the PR announcing the expansion of Sharp’s license (http://www.qualcomm.com/press/releases/2000/press221.html) included the following sentence: Under the terms of the amendment, Sharp will pay QUALCOMM a multi-million dollar license fee and ongoing royalties at the same rates irrespective of the licensed CDMA standard.. Though I haven’t found the announcement of the change(it may have occurred in one of the conference calls), my recollection is that the revenue from the fee had to be amortized over the duration of the contract. But I’m fairly sure that there are still licensing fees as well as the royalty. And perhaps that has as much to do with Nokia’s (and perhaps Broadcomm’s) unwillingness to sign new licensing agreements. From another PR, the up front fee is apparently not the same for all companies, indeed in some cases equity can be substituted for the fee. qualcomm.com "Our standard CDMA license agreement requires the payment of a multi-million dollar up-front fee in addition to ongoing royalty payments as the licensee begins to ship products," said Steve Altman, executive vice president of QUALCOMM and president of QUALCOMM Technology Alliances. "Start-up or early-stage companies with impressive engineering talent and ideas have or may desire to enter into a CDMA license agreement and to establish a closer relationship with QUALCOMM. Some of these companies prefer not to pay the up-front fee in cash, usually to preserve their cash to fund R&D. In certain cases, QUALCOMM will accept equity in lieu of cash….” It occurs to me that the company specific variance of the license fee might be a source of the FRAND arguments. Changing gears slightly, I was struck by one of Keitel’s statements in the CC. He said that 44% of the current quarter’s licensing revenue was attributable to WCDMA, which by all reports is only beginning to ramp up. Soon the majority of QTL’s revenue will be from WCDMA. From the estimate of $0.04-0.06 projected per share impact of Nokia’s intent to withhold royalty payments, I estimate that Nokia currently pays between 64-96M royalty per quarter or about $300M per year. That’s about a fifth of QCOM’s R&D budget. Nokia has to hate that. Thanks to all for your ongoing comments. Best, ku

To: ohohyodafarted who wrote (59115)	1/25/2007 11:06:16 PM
From: rkral	Respond to of 197351

"I believe some people here think that NOK can "exercise" the option any time from April 10 to the end of 2008 and that is not the way I understand it. Please correct me if I am wrong about this." Steve Altman's statement last November at the London Analyst Day seems clear. I quoted that statement here ... Message 23220626

To: ohohyodafarted who wrote (59115)	1/25/2007 11:16:29 PM
From: JGoren	Read Replies (2) \| Respond to of 197351

You are not correct. It is clear that NOK has until the end of 2008 to exercise the option to renew the license on the original terms. Please re-read my explanation (linked below), which I believe to be correct and consistent with everything I remember that both Qcom and Nok have said publicly. I think the rationale expressed in the post will help you understand why there is a gap--NOK wanted an opportunity to go on its own but a lifeline to jump back on the Qtrain. At least that's what I think it was thinking in 2001 when the agreement was negotiated. For its part, Qcom probably thought the likelihood of NOK being able to go without a license was pretty small and even if NOK waited until 2008 to re-up, it would get the same rate and maybe save some renegotiation headaches. Qcom let NOK know that regardless of the difficulties between them, NOK could always re-up. Except for the depression of the stock price because of the uncertainties, there is not a lot of incentive for Qcom to reduce its royalties or make concessions to NOK, because at the end of the day, NOK either has to come to reasonable terms or re-up under the old terms. Message 23221722