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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 (76912)	5/5/2008 5:30:54 PM
From: slacker711	Respond to of 197275

`The company notes a decline in ASP, If ASP declines are the determinant of high-end market share then you need to remove Samsung from your list of companies that are proving that Nokia cant compete. Samsung's ASP's declined by about 10% YoY.....a little less than Nokia, but not enough to make a difference. Samsung has commented extensively that they see low-end handsets making up a larger portion of their handsets as time goes on. Pretty much echoing Nokia's comments. LG's ASP's did rise YoY. Personally though, I think it is just a basic fact that low-end handsets are going to make up a larger portion of the total as time goes on. The vast majority of the unit growth is coming from the developing world, and that isnt going to change. If you want to see who is successful in WCDMA, I think it is much simpler to just look at WCDMA share....and Nokia is still the leader by a huge margin. I think the margin may drop some, but there is no evidence that anybody is going to pass them. Slacker

To: Art Bechhoefer who wrote (76912)	5/5/2008 7:02:47 PM
From: Eric L	Respond to of 197275

Flogging the IPR Dog Hi Art, << Eric, in partial response to your detailed comments, the following quote is from the recent Nokia press release on Q1 earnings: Our device average selling price (ASP) in the first quarter 2008 was EUR 79, down from EUR 89 in the first quarter 2007 and down from EUR 83 in the fourth quarter 2007. The lower year on year ASP was primarily due to a higher proportion of lower priced products and to a lesser extent the negative impact of the weaker US dollar. The sequential ASP decrease was primarily due to a higher proportion of lower priced products, a mix shift to lower ASP regions and to a lesser extent the negative impact of the weaker US dollar. Starting from the first quarter 2008, our device ASP excludes net sales from our Services & Software business. Prior periods have been reclassified for comparability purposes. The company notes a decline in ASP, attributed mainly to "a higher proportion of lower priced products . . ." >> Yep. That's how in Q1 the combination of product mix and forex tumbled but with forex much in play as a negative driver, as I'm sure you noticed, and as Nokia commented even though they underplayed it, and with a drift to lower priced products in Western Europe. What are Samsung's lower ASP's attributable to? In Q1 Nokia's ASP dropped €4 QoQ but was up $3 in USD to $125. By contrast Samsung's ASP dropped from $148 to $141 in USD (they report ASP in USD not Won) in Q1, and it dropped a whopping €12 from €101 to €89 in that same quarter. Since Q1'07 Samsung's ASP is down $13 from $155 but in Euro terms it is down €27 (23%) from €116. At $131 in Q1, LG's ASP is only $6 (€4) higher than Nokia;s but with a much stronger mix tilt to mid-range and high end feature phones. << These words from NOK management appear to be consistent with my view that NOK gets increasing sales from low end (GSM only?) handsets, but does not do as well at the high end, where WCDMA and related IP are essential. >> Nokia DOES do well at the high end. VERY well! Better than any competitor. More product at better margin. They have the broadest range of high-end handsets and those handsets pack more features and functionality than any competitor at each and every price point in the high end range. Nokia also does very well in the mid-range and the low-end. As for low end GSM and GSM/GPRS, and mid-range ersatz-3G EDGE, we are talking about over 60% of the TAM this year, upwards of 800 million handsets units. Everyone is trying to chase that lucrative market but Nokia is very hard to compete with across the broad range, and particularly in the sub-$100 MSRP range. << My view has been, and still remains that NOK derives a great deal of its success from maximizing profits on low end handsets that do not require QCOM IP, and at the same time promoting strategies that tend to discourage rapid adoption of 3G handsets, which in many instances require use of QCOM IP. >> In that respect your view is good. Nokia does derives a great deal of its success from maximizing profits on low end handsets, but where tunnel vision creeps in is that "QCOM IP" has little if anything to do with that success, although a Nokia IPR advantage against many (not all) of its competitors is one of many competitive success factors amongst many other well honed competencies. << The strategy is beginning to backfire as more and more users switch to WCDMA. >> It hasn't begun to backfire yet, since Nokia continues to increase WCDMA market share and drive 3GSM market share growth from both the handset side and the infra side, and increasingly with meaningful software content and services. The law of big numbers will eventually kick in, and Nokia will plateau or reach a market share ceiling sometime, but at that time (just as today) it will be a good idea to look at comparative actual unit sales in addition to share or share growth by any individual competitor. << As to the set aside for contingencies, it may or may not cover potential royalty payments to QCOM. Nokia, after all, is involved in other litigation apart from the QCOM related matters. >> They are involved in ongoing IPR litigation with QUALCOMM, InterDigital, and with IPCom (the Bosch IPR portfolio). In 2006 the accrual -- much of which (that not used for the 2G settlement) was carried over to 2007 was primarily for InterDigital. It is possible that the $803 million provision for IPR infringement in 2007 -- up $428 million USD YoY (and new provisions added in 2008) may not cover all licensing settlements at any settlement date, but the likelihood is that they will. You've repeatedly attempted to attribute Nokia's ongoing margin increase to non-paid royalties. Their actual audited IPR Infringements accruals which go well beyond the $20 million plus legal fees for QUALCOMM that you referenced, simply do not support that. Best, - Eric -