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

To: Art Bechhoefer who wrote (67977)	8/19/2007 1:57:50 PM
From: haroldS	Respond to of 197279

OLD Research re:WCDMA, OFDM Patents Qualcomm: The Gambler 03 December 2006 ARETE Research Brett Simpson, Richard Kramer You got to know when to hold 'em, know when to fold 'em. Know when to walk away, know when to run. You never count your money when you're sittin' at the table. There'll be time enough for countin' when the dealin's done. - Kenny Rogers, The Gambler After a series of public face-offs with Nokia, Qualcomm's share price has become inextricably linked with how a wide range of disputes over IPR will play out. Counting the cards is tricky given the web of non-disclosure agreements shrouding cross-licensing deals. We pointed out these risks in prior notes (see Qualcomm: May the Force Be With You, Apr. '06), but now the stock has fallen too far, back to mid '04 levels (despite EPS up 50% since). So much has already been discounted that Qualcomm looks attractive at $37 on P/E, DCF and sum-of-the-parts valuations. We see four reasons why we think the stock is worth an '07 gamble on reaching $47, or 27% upside. Place Your Bets. Remove Nokia royalties (assuming this takes years to resolve) and FY08 EPS falls 30c. With our estimates 12% ahead of consensus, we still end up with $2 EPS, putting the stock on 18x FY08 earnings, or 15x ex-cash. Qualcomm stock already prices in the risk that Nokia royalty income may not be recognised for years. Chips to Cash In. Conservative guidance means Qualcomm should raise numbers in FY07, and use its $10bn net cash for buybacks or dividends. Qualcomm has plenty of chips to stake its shareholders with during a period of tense negotiations. Full House. Our independent review of Qualcomm's IPR found that of its 750 declared patents to ETSI, we think it has 100 essential WCDMA patent families covering half of the c. 25 fundamental inventions making up the 3G radio layer. Its IPR position in WCDMA upper layers and core OFDM radio is weak, but Qualcomm has key radio patents to back up WCDMA royalty claims, but with five core areas expiring beyond '09, we wonder how sustainable this is. Raising the Stakes. Looking into the next decade, we expect the industry to force a change in the royalty regime, putting pressure on Qualcomm's business model. But altering current agreements will take years, as will resolving the many legal and anti-trust disputes. Qualcomm's valuation now discounts a WCDMA rate of just 1.5%; a blended 3% rate looks more prudent to us, justifying our new $47 target.

To: Art Bechhoefer who wrote (67977)	8/19/2007 2:14:58 PM
From: AlfaNut	Read Replies (2) \| Respond to of 197279

Many of the patents held by Nokia and others in regard to WCDMA, OFDMA, and even HSPDA may now be suspect because they cite or involve "prior art" This is way too big a stretch. Virtually every patent cites prior art; in fact I'm not certain I've ever looked at a patent filed in the last 20 or more years that didn't. I'd likely bet money, without even looking, that even Q's first, "foundational" patents cited prior art. To conclude that citing prior art in any way implies obviousness is very ill advised.