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

To: engineer who wrote (81192)	10/20/2008 9:47:34 AM
From: slacker711	3 Recommendations Respond to of 197351

First of all until one of you has actual real numbers on the nw royalty rate, how can you say reduced nuch less "substantially". If you know the number then perhaps you can make a stab at it, but you don't Nothing is concrete and you always have to make assumptions, but we do know a few numbers. Just to keep it simple, let's look at the FY guidance. Last November, Q estimated that the missing contribution from Nokia for FY '08 was going to be 25 to 30 cents. They are now estimating that Nokia's contribution for FY '09 is going to be 20 to 28 cents. The FY '09 guidance includes the amortization of the upfront payment, the legal savings, and the ongoing royalties. We can get an upper bound to the royalty by setting the amortization recognition and legal savings to zero (obviously not true) and assuming a growth rate for Nokia's WCDMA business. A conservative number for FY '09 might be around 15%. That would mean that under the old rate Nokia would have been paying 28.75 to 34.5 cents in FY '09. These numbers give us an absolute maximum percentage for the new royalty rate as 70 to 80% of the old rate. When you assume a linear amortization rate and $100 million in cost savings, that drops to about half of the old rate. I cant give you an exact number, but I can say with certainty that the rate has dropped substantially from the old number. Slacker

To: engineer who wrote (81192)	10/20/2008 9:50:09 AM
From: pyslent	2 Recommendations Read Replies (1) \| Respond to of 197351

If you know the number then perhaps you can make a stab at it, but you don't What we have is the guidance that Qualcomm provided as to the impact of Nokia for the next fiscal year. I won't look it up now, but I believe it was max 28 cents added to EPS due to a combination of 1) reduced legal expenses, 2) amortization of the upfront payment (now known to be about $2.5 billion), and 3) royalties. My estimate comes out to 1.6% for the new royalty rate, but you can do your own math. Seems to me that Qualcomm would have received about 39 cents in royalties alone under the old deal, although we really don't know the old rate (my guess was 3.5%). The 2.5B payment is for the past, as nobody does a pay ahead on anything. I am not sure I follow your logic on this Aren't ALL license fees considered "pay aheads?" At least that's how they are treated for accounting purposes.