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

To: Ramsey Su who wrote (28067)	4/22/1999 10:08:00 AM
From: DaveMG	Respond to of 152472

Ramsey... Tero is usually vilified around here so I think he should get credit where credit is due. SO FAR, it appears that GSM will get about 4/5 of China Unicom network deals and this is just China Unicom. All THE REST of the Chinese deals are GSM..And yes, fortunately G* is on the way. OF course it's too early to say where things will go from here but so far, he's right, regardless of the reasons one attributes to all of the various players motives. Moreover the greater the 2G GSM advantage, the more 3G power they hold. Japan remains critical to the story. When will we find out what NTT is doing? I'm amazed at how little info comes our way from Japan. Dave

To: Ramsey Su who wrote (28067)	4/22/1999 10:47:00 AM
From: Clarksterh	Read Replies (4) \| Respond to of 152472

Some CC notes: First, my standard disclaimer - I don't know shorthand, and cannot write think and listen at the same time, so there are undoubtedly some errors in here, but nonetheless I think it is reasonably accurate. Let me know if you think there were any major errors or omissions. Second, let me congratulate Qualcomm management on a very good quarter. Now on with the notes: 1) They explicitly said that the royalty rate would be the same for all sales of CDMA equipment - present or future, no matter whether it is 3g or CDMAOne. 2) They explicitly said that Ericsson does not collect royalties on handsets using Qualcomm ASICs. (Although they said in the post infras sale CC that the had to pay some small royalties to Ericsson for Qualcomm handsets, which of course use Qualcomm ASIC's. Obviously a fig leaf attempt here.) 3) Manufacturers can choose whether to build equipment which supports one mode, or they can build it to support multiple modes. It is the manufacturer's and operator's choice. 4) HDR (which is being kept in Qualcomm) will begin trials later this month at US West. 5) WK trials begin this month with two carriers. 6) Of the 9M ASICs shipped this Q, 1M were MSM-3000's. 7) On the topic of Samsung using their own ASIC's instead of Qualcomm MSM's, they mentioned that Samsung announced their own BBA's last year, but they still get most of their BBA's from Qualcomm. Also note that Samsung does not have a license to sell their ASIC's; they are using them as a second source. Thus Qualcomm expects to sign a contract for MSM-3100's in the Sept/Oct timeframe, and expects the MSM-3100 to be the primary digital ASIC used be Samsung. 8) Although Qualcomm reduced handset manufacturing costs yet again this quarter, it was offset by the annual price reduction that happens every January. 9) Nortel, Hitachi and Hughes will continue to get infrastructure modules from Qualcomm even after the sale. (Note I am not sure I captured this correctly. I was busy writing when they said this. Can anyone confirm this infras module thing?) Also note that the Nortel contract runs through Feb 2001. 10) Qualcomm is not currently shipping any G* gateways, but expects to ship a few more after G* goes on-line. 11) As mentioned in some previous posts, Qualcomm is writing off $3M in Leap Wireless warrants to better their chance of qualitfying for the new spectrum licenses. 12) Expect another $100M loss in the next quarter for the actual sale of the infras division to Ericsson. They couldn't, under GAAP, take it this quarter. 13) 20-25% of phone shipments next Q should be thin phones, and they expect to start volume shipments next month. 14) Some components of cell phones, both common to all cell phones no matter the type (GSM, TDMA, ...) and unique to CDMAOne, are in short supply. They have experienced no shortages to date, but it is a risk for the immediate future. 15) They expect that new patent suits in Europe may arise in conjunction with the licensing of manufacturers who have in the past concentrated on Europe. 16) The decision of exactly which modes of CDMA will be approved for use in the new spectrum has been delegated to the ETSI which has not yet made a decision. They may choose just one mode, or all three. 17) Korean handset sales may slow this quarter as carrier subsidies of handsets becomes illegal. (Note that Korea has been trying to increase competition in the cell phone market for 6 to 9 months, but I had thought this particular action had already started. Anyone know more info?) 18) Part of the reason that EPS was so good relative to last year was that Sales and Marketing were down substantially. This was due to the fact that last year Qualcomm had a large Super Bowl advertising campaign, but not this year. For the future they expect Sales and Marketing to bounce around between what they were last quarter and this. 19) Part of the $77M royalties this year was an adjustment from previous royalties, but it was no bigger as a percentage than previous adjustments. 20) Royalty expiration - They said that the royalty rate was the same whether the manufacturer used one patent or many. (Note that I took this to mean that someone who signs a royalty agreement cannot weasel out of it by trying to substitute their own IPR at a later date as they figure out the system, but it also has the effect of making the royalty stream last longer than many of the key patents.) 21) Qualcomm assumes that handset ASP's will decline about 20-25% per year. 22) Expect dilluted shares outstanding to be about 82M in next quarter. 23) There were 18M CDMAOne phones shipped last year. Expect it could be double that this year. 24) 20% of current licensees already have rights to manufacture 3g products. The rest need to be renegotiated. Any comments? Clark