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

To: slacker711 who wrote (68080)	8/21/2007 2:19:09 PM
From: slacker711	Read Replies (4) \| Respond to of 197448

Nokia doesnt break out WCDMA revenues but we can get a pretty clear picture of its contribution to their revenue line from Qualcomm's estimate for the missing royalties during the 4th quarter. Keitel estimated that the missing profits would amount to 5 cents a share. Qualcomm has 1.704 billion shares so those 5 cents represent $85.2 million fully taxed dollars. Keitel gave some clear insight into Qualcomm's tax structure during last quarter's call. seekingalpha.com And a simple way to think of it is the chip business is primarily offshore tax, probably low rate and the onshore operations essentially the licensing business taxed at full rate. So a 35% tax rate would mean that Nokia had contributed $131.2 million dollars to QTL. So what is the royalty rate? Q and Nokia had a bit of a back and forth over the exact rate but I think a rate of 3.5% would be in the right ballpark. At that rate, Nokia's WCDMA revenues would be $3.745 billion. Nokia's total handset revenue in the 2nd quarter $11.538 billion (using 1.34 Euros to the dollar). That means that WCDMA handset revenues were 32.5% of total handset revenues. I would also add that Nokia has stated that WCDMA handsets are more profitable than GSM....so an even higher portion of their total profits are coming from WCDMA units. Can I safely say that none of these numbers fall into the "very minor" category? Slacker

To: slacker711 who wrote (68080)	8/21/2007 5:21:16 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 197448

"very minor" is the total number of handsets with WCDMA capability sold by Nokia so far as a percentage of total number of handsets sold by Nokia. I don't have the latest figures, though I've seen estimates from market research groups. Is it even 10 percent (up to the quarter ending June 30)? How many GSM capable handsets sold in Europe, North and South America, Asia, and Africa also are WCDMA capable, and what is the percentage of the total sales? And what is the breakdown for Nokia? Even QUALCOMM has estimated lost royalties from Nokia not paying is relatively small, so far. But as more handsets are sold for WCDMA, OFDMA, and possibly WiMAX capability, the number using QCOM IPR is increasing dramatically. Furthermore, the number of CDMA2000 capable handsets being sold by Nokia as a percentage of total sales is going down because Nokia has admitted it is no longer participating in this market with its own chips. This INCREASES the relative importance of Nokia handsets with WCDMA capability going forward. Let me put this whole argument another way, though I know it has been stated many times before: Nokia can't sell its own WCDMA handset today without using QUALCOMM IPR. They're going to get the chips either from TI, Samsung (unlikely), Broadcom (later on, possibly), or some other fabricator, but whatever they use for a WCDMA chip will contain QCOM IPR. They can pay QCOM now or pay them later (with interest). Or they can let a competitor take market share. And finally, Nokia, through its PR statements, knows very well the importance of WCDMA to its own future. Art