Another Investor's thoughts on WILN v HTC related to QCOM
QCOM is mentioned in the 2/11/11 CIBC report as potentially infringing WiLAN's patents #'s 802, 897, 068.
This would go back WAY farther in QCOM's history and cover every QCOM chipset in every handset sold in the U.S.and that's a huge number.
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From CIBC's report April 2, 2007:
The CDMA market has seen strong growth, with subscribers growing across all
regions of the world for the past 10 years at a CAGR of 54%. The majority of
subscribers are located in Asia at 44%, followed by North America with 34%,
Latin America at 20% and the remainder in Europe, Middle East & Africa (EMEA).
The number of global subscribers has grown from 4.25 million in 1997 to over
350 million today. Our analysis of Wi-LAN’s opportunity in the CDMA industry
incorporates only the North American market from 2007 to 2015. We believe
this is conservative considering the number of CDMA products that were sold
prior to this timeframe. In the past, courts have awarded retroactive licensing
fees, which would be upside to our current numbers. The historical subscriber
rates provide a good indication of how pervasive this technology is across the
world.
Wi-LAN’s Licensing Revenue Opportunity For CDMA Handsets
Wi-LAN holds CDMA patents for the North American region and has said it will
initially focus its licensing efforts on the system-level companies (i.e., mobile
handset OEMs). We have valued the licensing revenue opportunity at
US$630 million from 2007 to 2015. We arrive at this forecast by taking the
number of CDMA handsets in the market (including cdmaOne, CDMA2000,
WCDMA, HSDPA and CDMA2000 1xEV-DO) from 2007 to 2015 and applying an
ASP of $125 today, declining by 5% annually. We then assume that 35% of the
market is in North America and adjust this number to remove Nokia (which
represents 32% of the market), as it has already been licensed. We have applied
a royalty rate of 1% to establish the amount of licensing revenue from these
customers. We think this is a fair estimate, considering Qualcomm has received
royalties as high as 5% for its CDMA patents. We have not given Wi-LAN any
revenue for infringement from the period of 1997–2006.
Due to the lumpiness and lack of visibility into when licensing deals will be
signed we have made assumptions about how much of the market will be
licensed each year to drive our revenue model for our DCF. We assume that by
2008 35% of the remaining market will be licensed and that this number will
grow to 50% by 2011 (see Exhibit 9 for our analysis).
CDMA Mobile Handset Targets
There are many potential infringing companies in the CDMA market. However,
the bulk of the market is represented by the top five OEMs and this is where
Wi-LAN will focus its efforts. SI rated all of the patents pertaining to CDMA as
“A-rated,” with excellent licensing potential. Now that Nokia has taken a license
to this portfolio, we are more confident that others will also step forward. We
believe that the CDMA portfolio offers the best short-term potential for licensing
deals.
Some of the largest target CDMA licensees include: Motorola (MOT–SP) (18%
market share), Samsung (13% market share), LG (7% market share), Sony
Ericsson (ERIC–Nasdaq) (6% market share) and Siemens (SI–NYSE) (5%
market share). We have listed a number of potential targets that Wi-LAN may
have already, or could, put on notice in Exhibit 10.
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In exhibit 10 mentioned above, Qualcomm is listed both as a target for product and chipset infringment. I suppose that some of the settlements with handset mfgs in the EDTX litigation may have settled on past CDMA infringment even where Qualcomm chips were used. But others have not.
CIBC only ascribes a settlement value for HTC infringment at about $12 million (as opposed to TXN at $67 million). They have ZTE down for $23 million.
The wildcard with QCOM is who is paying for Apple devices using CDMA now being sold by Verizon?
AI
