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

To: David E. Taylor who wrote (81160)	10/17/2008 2:21:17 PM
From: pyslent	Read Replies (1) \| Respond to of 197623

The only vague aspect is exactly how much of the total EUR 1.7 is attributable to these two components. Agree with much of what you said, especially with respect to the arbitrariness of the split between back-royalties and "bulk." My impression is that for simplicity sake, Nokia intends to back out what they have been booking as royalty provisions from the upfront fee, and assign the remainder as prepayment to be expensed over 15 years. Otherwise, I think they would have discussed their intention to restate earnings from the past 5 quarters. At the end of the day, Nokia will have arbitrarily picked a royalty rate that was less than the previous agreement but more than the current agreement, and applied it to the past 5 quarters. I don't know if accounting standards require that Qualcomm follow suit in booking the same amount as their one-time back-royalty revenue amount.

To: David E. Taylor who wrote (81160)	10/17/2008 3:14:12 PM
From: Jim Mullens	1 Recommendation Read Replies (1) \| Respond to of 197623

David, re: NOK 1.7 B euro payment accounting, and >> ”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.” Thanks for your interesting analysis. It is a puzzle, and you may well be correct in your interpretation, but I continue to question that Keitel will not book the unpaid NOK royalty for the 5 past quarters in Q4FY08 as an accrual on the income statement, even though payment won’t actually be received until Q1FY09. A Q4 accrual would appear to be the correct (Kosher) accounting treatment from my financial analysis days, although I’m not an accountant. Secondly, creative accounting does happen, but there are many rules that govern proper accounting treatment and as such I doubt the amount for the royalty due and unpaid thru Q4FY08 was “arbitrarily” determined. One would think the royalty rate agreed to in the new license would apply to both 1) unpaid amounts for sales thru Q4FY08 and, 2) for sales during FY09 and beyond. It would be to QCOM’s (& QCOM longs) advantage for EPS comparison purposes to book the income in FY09, but I don’t believe that meets the “smell test”, and given the Q conservative ways (& Sarbox) I don’t believe Keitel would stray too far from accepted principles / become to “creative”. Also, is not "a" NOK delta is baked into the analyst’s estimates for Q4, and not booking that income in Q4 would be reported as a big miss & who knows how that would be spun and what the market reaction would be. Any accounts / CPA’s out there?

To: David E. Taylor who wrote (81160)	10/17/2008 3:45:06 PM
From: ggamer	1 Recommendation Read Replies (1) \| Respond to of 197623

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. One thing to remember is that NOK formula might have looked like this before the settlement: Total Bill = past royalties due + one a pre-paid license fee going forward The settlement formula was perhaps as follows: Total Bill = past royalties due + one a pre-paid license fee going forward - Patent Sales to QCOM - Long Term (15 Year) contract (no legal fees) - 4G royalties in the future - Possible ASIC contract - Possible joint ventures - Dollar hedging - GSM royalties from QCOM - etc. Perhaps the final value was lower than they had originally planned for/accrued but I am sure outside of dollar term all the other term also have cost and benefit associated with it.