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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Gregg Powers who wrote (12371)	7/15/1998 2:14:00 AM
From: Maurice Winn	Respond to of 152472

Gregg, I've always said, don't tell customers they can't have something, just quote them the price at which you will supply. So I guess I shouldn't change my tune now. So, give L M Ericsson a menu. L M Ericsson is who we are really talking about here after all. Give the menu to the others too. W-CDMA IPR rights = $x per bit, or % of revenue or whatever. cdma2000 IPR rights = $y per bit, or % of revenue or whatever. cdmaOne IPR rights = $z per bit, or % of revenue or whatever. Then just set those x, y and z figures so Qualcomm makes the same amount of money in the long run, net present valued and all that. If Ericsson chooses W instead of cdma2000, let them go for it. Why restrict them if they are dead keen to use W-CDMA? They might maximize their value that way while Qualcomm makes just as much. Obviously y would be a lot cheaper than x because there would be no loss of competitive position for Qualcomm and given the lack of technical merit in W-CDMA, Ericsson would no doubt choose that option anyway, enabling them to participate fully in the new standard. And z would be cheaper than either, though dearer than the already agreed cdmaOne royalties. Now let's say everyone gets really hardnosed and does what the USA, European, Saddam, New Zealand and the Japanese have traditionally done = cannibalize their own consumers, taxpayers or unfavored silent majority to subsidize the favorites who line the pockets or genuflect to the greatness of those in power. The USA does agricultural protectionism, same in Europe but a lot more besides, Japan does rice and lots more protection and subsidies, NZ took it to the pinnacle as an art form before deregulation got underway with a venegeance in 1984 and Saddam happily allows his population to suffer while he builds ever better palaces. So Europe might say, okay, no W-CDMA, then no CDMA at all and we'll just continue with GSM. Get lost Qualcomm. And Philips, Nokia, Siemens and others will go flat out on all standards, including cdmaOne. But no cdmaOne or cdma2000 in Europe. Say they go 5 years like that. Bad for Europe and bad for Qualcomm, but too bad say the couldn't-give-a-damn politicians who are very used to seeing Europe suffer bureaucratic absurdities. That would mean a longer run for GSM and massive capital destruction, but that's normal enough if special sectional interests are served. Anyway, to cut a long story short, throw Ericsson the W-CDMA tar-baby and continue with cdma2000 for the rest of the world and wait for one standard or the other to win. Either way, Qualcomm wins the same amount if x and y are judged correctly. Like you, I have much trust in Irwin and co's judgement, but it's my capital and I like to keep a close eye on it and understand the lay of the land. Mqurice

To: Gregg Powers who wrote (12371)	7/15/1998 2:54:00 AM
From: Bux	Read Replies (1) \| Respond to of 152472

Gregg, you say management has assured you that the net outcome (of reducing royalties to all) would be a far greater royalty stream than otherwise would be the case and you provide a simplified example (3% of 30 < 2% of 100). How does this jibe with the popular assumtion that no mobile CDMA is commercially feasible without QCOMs IPR and with QCOMs statement that they will not license WCDMA that is incompatible with CDMAone. Deduction dictates that either management might be willing to license their IPR for non-CdmaOne systems (presumably at a much, much lower royalty) or that Europe and presumably other regions either not adopt CDMA systems or will be so delayed in their adoption that royalties would suffer greatly. I appreciate all the insightful analysis and input you have provided to this thread, and this is the first thing you have said that is not crystal-clear to me. I realize your example was hypothetical, perhaps it was an extreme example of possible royalty reduction? Would not a 5% to 10% reduction in the royalty rate seem to "grease the wheels" adequately in light of QCOMs strong IPR? Jacobs himself was quoted recently as saying he thought it remote that Europe would manufacture mobile CDMA without a Q license so avoiding litigation over IPR would not seem to be the motivation. Is there perhaps possible litigation over protectionism or unfair trade practices if QCOM withholds licenses just because the IPR would be used for a network that is incompatible with CdmaOne? Just a thought. Regardless of all the "unfinished business" I am quite pleased with the way things are shaping up and while Maurices prediction sounds a bit optimistic, I think it will prove to be almost accurate. Bux (SBUX not $)