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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Robin Plunder who wrote (96233)	11/3/2012 3:18:30 PM
From: Maurice Winn	1 Recommendation Read Replies (1) \| Respond to of 219076

Qualcomm is spending $billions per year on development including inventing new things which are patented and they are buying new things which are patented too, such as Halo. So while the original crucial patents such as for power control have expired, there are megatons of patents which have been added since. A basic phone could be built without paying Qualcomm any royalty. But almost nobody wants a basic phone working on old technology such as CDMA [code division multiple access]. Now people want OFDM [orthogonal frequency division multiplexing]. The Qualcomm royalty deal is so cheap at about 4% that there is not much point in trying to get around the patents. Nobody seems to be trying that. LTE total royalties are about 12%, so Qualcomm royalties are a drop in the bucket of the total cost. As new things such as Halo are rolled out, Qualcomm bundles the control technology into the chips they produce so it's very difficult for others to produce chips that are good enough. Qualcomm has bought into wifi via Atheros and an earlier wifi maker, so that's also bundled in. The royalty agreements give the parties access to the continuing stream of developments. If Qualcomm charged the same sort of rate as others do for their patents, the royalty package would be about 90% of the phone's cost. Qualcomm provides a supersonic bargain royalty deal which is partly why the legal attacks have got nowhere. It was laughable that Nokia, Broadcom, L M Ericsson, and others have attacked Qualcomm over royalties while the attackers like to charge 1% for 1 patent, 2% for 3, 5% for a half a dozen. Last century, I discovered OFDM being developed at Auckland University and we [SI gang] pursued that and asked Andrew Viterbi how Qualcomm would handle it. He demurred. I was nervous. He subsequently left Qualcomm and joined Flarion, an OFDM developer. That's like Jesus joining Islamic Jihad. A few years later Qualcomm bought Flarion for nearly $1 billion but at least the problem was resolved. Now OFDM which is LTE is inside the tent. There is a possibility of pulsed monocycles which I had thought of 20 years ago when first wondering what might happen, but apparently that's not going anywhere fast. Even CDMA is efficient enough that there's not a great advantage in going to OFDM in cost saving to the subscriber [because most costs of usage are in corporate costs, not the spectrum itself], but the operators still want to go to LTE. Nobody has come up with any way of using neutrinos which could be fired straight through the centre of the earth but that's a theoretical possibility. Even detecting neutrinos is absurdly difficult with $billion budgets. We won't be using Higgs bosons either as it's not even certain they exist. So Qualcomm is pretty well it with a few hangers-on in the LTE realm charging 8% for their piece of the action. Wifi has an advantage in that there's no 12% royalty to be charged. But as I have always argued [most disagreed], the royalty rate is such a small part of the total cost of owning and using a device for a couple of years that the subscriber barely notices the cost. Now people realize I was right. W-CDMA/HSPA is powering ahead at 12% royalty while CDMA networks are being turned off although the royalty was only 4%. The CDMA technology was better than the W-CDMA/HSPA but economies of scale and political protection meant the 12% won. When you pay your 12% royalty, you are paying the price of that political rip-off though you are unaware of it. LTE is dawning and again you will pay a 12% royalty. GSM used to be 16% and the phones were expensive too but even so, GSM roared ahead, with Nokia, Motorola, and L M Ericcson pre-eminent because they were major patent holders so could undercut the Asian makers who did not have that ring-fenced royalty protection, having to pay full freight 16%. The thing to worry about with Qualcomm is Big Corporate Syndrome. There are now 10s of thousands of people all living in style. There were once just a few hundred doing amazing stuff working day and night. Even as the revenue roars ahead, the expenses seem to climb just as fast. They have also had a lot of trouble inventing new things such as MediaFLO, BREW, Wingcast, Eudora, Globalstar, WirelessKnowledge, mirasol and many other things which I thought were great ideas which should have made Qualcomm the first ever $1 trillion company. Some were mismanaged [MediaFLO, Globalstar, Eudora] while others are hard to do [mirasol]. I sold a chunk of my QCOM earlier this year at $64 to repatriate some money and to do other things, and also to reduce my concentrated position. So far so good on that as the share prices has been stuck under $60. But their profits and bank account keep growing so there is continuous upward pressure. There is any amount of technological improvement still to come so it's not as though it's a mature industry. Competitors have had a LOT of trouble, with Intel struggling, with market cap only $110 billion to QCOM's $100 billion. Intel sold hundreds of millions of chips at high prices, while Qualcomm will sell billions of chips at low prices. I like things that help all people. Cheap is necessary to get to billions. Qualcomm can do cheap. Unfortunately, they don't have the cheap mindset and get stuck behind greedy operators who kill things off such as CDMA, MediaFLO and Globalstar by charging too much money. It's going to be years before LTE peaks. Peak People will be in 2037. Peak Oil will too. Perhaps Peak QCOM will be 2037. That is still a long time off with lots of thrills and spills to come before then. Mqurice [That's a very brief executive summary]