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Technology Stocks : Apple Inc. -- Ignore unavailable to you. Want to Upgrade?

To: slacker711 who wrote (69134)	9/24/2007 1:56:48 PM
From: inaflash	Read Replies (1) \| Respond to of 213177

Qualcomm (and most other IP owners in the handset world) base their royalty on the wholesale price of the handset. Samsung sells a handset for $200 to Verizon which then allows them to set the retail price at whatever level they want. The royalty is calculated off of the $200 wholesale price even if the customer received it for free. Does that mean that it doesn't matter whether the handset sells for $600 or $200 that Qualcomm doesn't benefit? If that's the case, I don't understand why the force Verizon to pay the royalties instead of Samsung, keeping the accounting much simpler. The only reason I see in dealing with the retailer would be to benefit from higher prices. Maybe there's an unseen accounting benefit out of all this as well. With Apple's model, there is no wholesale price. Apple is selling directly to the customer and then getting a portion of AT&T's monthly revenue. Right now, the royalty calculations could be based off the $399 retail price, but what happens if/when the price drops to zero? There is no minimum floor in Q's traditional royalty model. I really dont think that any of the IP holders are going to let Apple pay nothing if they are getting hundreds of dollars in backend payments. If Apple is the one paying the royalties, there are definitely going to be some tweaks to Q's standard contract (the same is true for other WCDMA IP holders). Personally, I think it might be cleaner for Apple have their OEM deal with the IP issues, but we'll have to see how this plays out. There's a lot of legal details to be ironed out, but it could be argued (by Qualcomm) that ANY payments from ATT to Apple related to the phone can be considered part of the "wholesale" cost. So even if the iPhone were free, the rumored $7/mo x24 month transfer from ATT to Apple can be used as a base. Of course, I don't think Apple and ATT want to divulge this part of the deal, so they'll have to work out something more specific with Qualcomm. It would be much simpler for everyone to fix a royalty payment or at least the phone price it's based on.

To: slacker711 who wrote (69134)	9/24/2007 2:38:21 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 213177

since Apple gets back-end revenue in addition to the front-end $399, QCOM and other IP holders can claim that the royalty must be based on the entire revenue stream received by Apple. so Apple will owe QCOM $19.95 the minute it sells a phone, and then owe 5% of all future revenue which the carrier delivers to Apple. with this approach QCOM doesn't care how Apple markets the phone ("free" or $399 or whatever); it only cares about actual cash flows or other consideration.

To: slacker711 who wrote (69134)	9/24/2007 3:25:50 PM
From: Eric L	Read Replies (2) \| Respond to of 213177

Wholesale ASP v. MSRP and MRP ... Slacker, << With Apple's model, there is no wholesale price. Apple is selling directly to the customer and then getting a portion of AT&T's monthly revenue. >> While I agree with most points in your post I'm not sure I agree with that one in its entirety. We don't REALLY know what Apple's net wholesale price after credits and debits to AT&T and other carriers (which may be lower than MRP) is, do we (or did I miss something authoratative in this regard)? - Eric - Best, - Eric -