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

To: Mike Buckley who wrote (30083)	5/14/1999 11:39:00 PM
From: kech	Read Replies (1) \| Respond to of 152472

Michael - That is a tough one because there is an element of truth to the quote. The Q was using its infrastructure division to push for a market determined standard (with Nortel, Motorola, and Lucent) by demonstrating successful CDMA system implementation. It gave up this form of control, of which it was only a minor influence anyway, in order to get E to accept, and pay royalties for, all of its CDMA patents. But it is not necessarily quid pro quo - in other words, the quote is worded as if it gave up something important to get something else. In fact, it could just as easily be viewed as that it sweetened the pot with the infrastructure division in order to get all of the royalties on GSM3. In other words, it gave up something symbolic in order to get something that is very material. It can also be viewed that it did this because it believed that Nortel, Motorola and Lucent would represent CDMA infrastructure well in the market place where financing and subsidization are very important. In addition,with the arrival of Vodaphone/ Airtouch, it could creditably expect that a large European Service provider would have a strong interest in pushing for a converged CDMA2000. So, it didn't "have to give up proprietary control" - in fact it was no longer as important as it once appeared to be when Qualcomm had to demonstrate that CDMA infrastructure could work and could be improved to achieve some of the early capacity targets. Instead, it gave up something that had declined in importance to get something that had increased in importance - royalty and licence rights to 3rd generation CDMA or as the quote calls it, GSM3. That is how I see it. Tom

To: Mike Buckley who wrote (30083)	5/15/1999 9:56:00 AM
From: DaveMG	Read Replies (3) \| Respond to of 152472

Mike, Here's my take... Let me start out by saying that I'm not exactly sure what the definition of "proprietary control" is but that I suspect that it is somewhat fuzzy, and that more often than not this control is conferred by the size of the installed base and applications dependent on this base rather than some whizzbang technical knowhow/property. Q definitely did give up some control over the upcoming 3G "standard" by agreeing to let the marketplace, ie carriers themselves, fight over exactly which parameters to use for their CDMA modes. We can speculate all we want to about the rational but IMO this is an undeniable fact and contrary to the assertion made by Tom has nothing per se to do with no longer having an infrastructure unit. On the other hand it seems that QCOM patent primacy over CDMA of all stripes was reaffirmed by the Ericsson agreement, removing the only serious legal challenges to their broad portfolio. Some Ericsson and Nokia supporters might argue about this but it's my perception that implicit in the royalty arrangement is the recognition that for now and the foreseeable future ALL CDMA SYSTEMS WILL DEPEND UPON INTELLECTUAL PROPERTY OWNED AND CONTROLLED BY QUALCOMM. Note that this does not mean that QCOM has control over the entire system but controls ideas/patents which are ESSENTIAL. Hence, if QCOM does not become the MSFT and/or INTC of CDMA wireless then no one else will either. No other company stands to receive anywhere near the same scale of royalties as Q, and as far as I can tell, there is no real near term threat to this cash stream other than a slowdown in the adoption of CDMA. While it's hard to say what will happen over the next few years, the placement of CDMA at the center of all 3G proposals, and the fact that these standards are being negotiated today, essentially secures the future in this regard. Regardless of ultimate WCDMA specs (your moniker was GSM3), QCOM has control of who does what and takes a piece of ALL the action. Because Q controls licensing, we will not see INTC, IBM, TI, Samsung et al, let loose in the marketplace unless Q grants them permission. But it's still very early in the “Digital by QCOM Inside” vs Nokia, Motorola, and Ericsson game. QCOM MUST execute flawlessly over the next few years if this strategy is to have any chance to succeed, more the province of royalty than gorillahood to use GG parlance. A few years ago, in the heyday of analog, Motorola dominated. Then Ericsson. Now Nokia. This pattern may continue, a continuous bar room brawl.. Hope this helps. DMG