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

To: Eric L who wrote (81153)	10/17/2008 11:47:01 AM
From: JGoren	Read Replies (1) \| Respond to of 197623

I'm sorry, but his comments are contradictory. If they were back payments, it would seem that they ought to be expensed quickly and not over the life of the agreement. Maybe the agreement is silent or allows wiggle room for both parties to handle it accounting wise the way that is most beneficial to them. (I'm no accountant.)

To: Eric L who wrote (81153)	10/17/2008 1:51:12 PM
From: David E. Taylor	2 Recommendations Read Replies (4) \| Respond to of 197623

It's been clear from back on 7/24 that this cash payment has two components, one for the past royalties due, and one a pre-paid license fee going forward. Simonson says that the "bulk" of the payment is the second part and will be expensed over 15 years. Keitel said that the total payment is "much more" than what was owed to QCOM in past royalties. No inconsistency there. Since the EUR 1.7 billion will change hands on some date this quarter, it will disappear from NOK's Q4 balance sheet, and appear on QCOM's balance sheet, and also be reflected in the cash flow statements. The only vague aspect is exactly how much of the total EUR 1.7 is attributable to these two components. Keitel's original guidance of 7 to 13 cents on Q4 EPS provides a guide to this split, even though we now won't see that in Q4. As I've commented before, that EPS adder translates into $170 to $315 million. Since that's much less than what NOK owed for 5 past quarters (let alone 6 now), it's always been my view that it was a somewhat arbitrary division by Keitel. Ergo, it's highly unlikely that the settlement agreement provides any precise split of the payment into the two parts, because if it did, they would likely have little wiggle room on the accounting front. That way, both parties have flexibility in accounting for the payment on the income statement, part as a one time cash payment in the quarter in which it's paid, and the "bulk" amortized off and charged to earnings (negative for NOK as a COGS, positive for QCOM as QTL revenue) over the 15 year life of the agreement. It does sound from the last sentence you quoted from Simonson that NOK was setting aside ("providing for") at a higher royalty rate than they ultimately settled for. David