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

To: Gregg Powers who wrote (15773)	9/30/1998 10:11:00 AM
From: dougjn	Read Replies (1) \| Respond to of 152472

Gregg, that analysis makes a lot of sense. It has the ring of truth to it, seems to me. (And though I like Qcom now, I'm not a true believer, as people here know.) I hope the Q continues to hang tough against Ericy. The inherent advantages of CDMA for data transmission seem much greater than even the voice advantages. That will be the future. Doug

To: Gregg Powers who wrote (15773)	9/30/1998 1:30:00 PM
From: dougjn	Read Replies (2) \| Respond to of 152472

… while there are some basic differences between IS-95 and W-CDMA, most of the major alternative design elements are in areas peripheral to Qualcomm's core IPR. While our counsel was loath speculate on another's motives, it seems reasonable to conclude that some of the elements of W-CDMA were specifically designed to create bilateral IPR, i.e. the need from Qualcomm to cross license with ERICY in order to build W-CDMA related products. Absent these modifications, W-CDMA is profoundly similar to IS-95. The implications of this passage from your most recent post on the strength of Qcom's patent position, is now sinking a bit more deeply in. If Ericy's strategy is indeed as outlined above, it could be a pretty good one, it seems to me. Unfortunately. Yes, Ericy will have to come to Qcom and get Qcom's agreement to use Qcom's extensively necessary IPR in W-CDMA. But here's where Ericy massive politicing and PR campaign come in. If Ericy can convince the rest of the world that W-CDMA is what Europe certainly, and then accordingly the rest of the GSM world is going to adopt, then there may be a real tendency on the part of even, say, the Koreans to wait a bit and not implement CDMA 2000. Because there are real advantages to compatibility world wide. And not incidentally because Ericy lays out a strategy for how the royalty payments to Q and anyone else under their W-CDMA standard will be lots, lots, lower. With all those alliances and commitments to its 3G standard firmly in hand, Ericy then turns to the Q. "Qcom," says Ericy "we know you have some very fine IPR. We admit frankly we can't get around it in the near term. But we're making great progress, so don't be too sure on how long it will take us. The real point though is this. You want to sell Asics, handsets and infrastructure for the W-CDMA standard, don't you? You're not just a royalty clipping house are you? Well Q, how are you going to sell that stuff without a cross license from us for our IPR in the W-CDMA standard? You can't. We'll cross license to you, but only if you license your CDMA IPR specifically to the W-CDMA standard, and do so on commercially reasonable terms. Say 0.5%. We'll throw in out IPR for free. Now you can refuse and hold out for a few years. Meanwhile you'll be loosing any chance of royalties and chip sales to the GSM world. You'll also miss out on any third generation royalties or sales to speak of, because almost the whole world has decided its going with W-CDMA for third generation. Even your Koreans. So lets get reasonable, Q. Modern history has not treated kindly technology companies that don't keep moving, and fast." So says Ericy. Isn't that a pretty fair strategy for Ericy to parlay GSM's market penetration, and the desire of the CDMA licensee world to get its royalty load down in the next generation, into an alliance that can succeed in prying licensing out of Qcom at much cheaper rates? And leave them with much less advantage in Asic design? Comments anyone? Doug