Replies to post #22251 on Qualcomm Inc (QCOM)

[Eric]

An Uninformed Opinion on the Evolving Qualcomm/Nokia Relationship ...

... that potentially goes well beyond a sinple semiconductor supply relationship and evolves into a meaningful and productive strategic partnership.

Mornin' Jeff,

<< Eric, you assert that ST-Ericsson, Broadcom, and Qualcomm are positioned to fight it out for 3GSM sockets at Nokia. >>

I did and as a matter of public record they certainly are. Going one step further, I've thought from the outset (i.e. from the time IP matters were settled last July) that while it won't happen overnight that Qualcomm has the potential to eventually win a lot of 3G (and eventually 4G when there really is a 4G) sockets from Nokia ... possibly at some time in the next decade becoming their primary IMT-2000 3G and IMT-Advanced IC supplier. By all appearances things seem to be falling nicely into place to enhance that potential opportunity.

<< In your opinion, would the NOK/QCOM license permit the use by Nokia of unlicensed BRCM 3G basebands? >>

I haven't seen, and most likely will never see, the cross-license terms, or the terms of any supply agreement which makes me unqualified to tender an informed opinion on the subject of your question ... and that, of course, places me in the same boat as (virtually) every other contributor to the various wireless discussion boards we participate on.

That said, I sincerely doubt that any license or cross-license Nokia entered into with any GSM/3GSM IP holder or any supply agreement entered into with an ASSP or ASIC supplier would include a requirement to use only IC suppliers licensed by the licensor or cross-licensee of IP or contracted supplier and member of Nokia's value chain / supply chain, or a prohibition to not to use such.

As a practical matter, I also doubt that Qualcomm would risk endangering their newly formed and potentially very lucrative collaborative relationship with Nokia by initiating any legal action against Broadcom that would potentially directly affect Nokia as a downstream partner of Broadcom (or ST-Ericsson). I consider it to be even less likely that they would initiate any action against Nokia. I think that one of the great potential additions to Qualcomm's senior management was the appointment of Donald Rosenberg as EVP and CLO reporting directly to PJ who I increasingly have great respect for. I don't think Rosenberg would sanction either tactic and would advise against taking such a risk, and since Qualcomm is no longer under autocratic rule, I doubt that such a tactic would ever be adopted and employed ...

... so that's my uninformed opinion, FWLIW.

In the April 21 Forbes article posted here twice yesterday, Elizabeth Woyke opined that:

"Qualcomm executives may discuss its teamwork with Nokia during its second-quarter earnings call Wednesday"

I certainly hope they do, to the extent they are able to do so. If not part of the body of their presentation, hopefully the subject is surfaced in Q&A and if so we learn something beyond what has been covered to date in press releases or other statements.

Cheers,

- Eric -

[Jim Mullens]

Jeff, re: Infineon wins NOK EDGE Chipset Supply Deal, and >>>>

“would the NOK/QCOM license permit the use by Nokia of unlicensed BRCM 3G basebands?”

That’s the $64 question bugging me also, since QCOM’s prior licenses stipulated that a QCOM licensed handset mfg if using other than a QCOM baseband --- that baseband supplier was also required to be a QCOM licensee.

Re: NOK & BRCM , I’ve also questioned if that applied to EDGE products as well as 3G and asked such of QCOM at the ASM without a specific answer (as expected).

NOK’s new EDGE deal with INF adds “fuel to that fire” with these interesting snips>>>

Snips for INF announcement article >>>>>>>>>>>

”The deal marks Infineon's move towards supplying higher value products for Nokia, whose key suppliers of EDGE chipsets… -- have been Texas Instruments and Broadcom .”

From BRCM’s 2Q CC, I question if BRCM should even be considered a “KEY” NOK supplier since BRCM is not as yet supplying anything EDGE to NOK >>>

BRCM Q2 CC Snips >>>>>>>>>>>>

“In the cellular area, we’re starting to see our EDGE and 3G baseband products ramping. And in Q2, we expect to ship millions of EDGE and 3G chips primarily to Samsung. Nokia, we believe will remain on track to begin deployment of our EDGE products in 2009. At the request of our customer (NOK ?) and in order to protect their confidentiality, going forward, we will no longer provide any further updates on our deployment plans or schedule until products become generally available in the market.”

Ed (lying) Snyder even picked up on this with >>

“I want to go back to wireless if you can a bit here, your product is starting to shift with you no longer to be named main customer in the EDGE platform”

With McGregor’s reply (still expecting to see a return from their huge cellular investments – and boasting—begun in 2005—hoping for something meaningful in 2010) >>>>

“. I mean our goal on our cellular investment at this point is to start getting some leverage on the investments that we’ve made and to see moving towards the return on those.

If we were to get significant new customers or dramatically expand the footprint versus what we’ve talked about, yes, that would possibly entail additional cost, but we would only do so if we saw that we had those design wins and a compelling opportunity there. So I think we’ve got a pretty good discipline and cost model on our cellular space. We do expect that to begin to ramp this year. I wouldn’t set high expectations on a large amount of revenue this year. I think 2010 is where we’re going to see more of the volume ramp in that space and yes, we are looking to see a return on the investments we’ve made there.”

Some further thoughts >>>>>>>>>

1. QCOM’s new NOK license appears to have a royalty rate considerably less than their prior rate. Such concessions are not made without quid pro quo.

2. BRCM remains the biggest “thorn in QCOM’s side” after the NOK settlement, and must be considered a major element to be resolved one way or the other.

3. A NOK license with similar baseband supplier license language would go a long way to resolving the BRCM stalemate.

4. NOK has a history of throwing its suppliers under the bus “if push comes to shove”, so would it really be a big deal to abandon BRCM with only minor supplier ties (only being a trusted ally helpful in the EC issue)? I don’t think so, considering what is happening to TXN’s NOK business relationship (#1 chipset supplier “being thrown under the bus”).

5. With Infineon now in NOK’s EDGE picture is BRCM really needed (as ED says –“you no longer to be named main customer in the EDGE platform “)?

…..has BRCM just been “thrown under the bus” without yet even supplying one EDGE chipset to NOK?

….Will this force BRCM to negotiate a QCOM license, and even if after doing so, will NOK really need BRCM with Infineon in the picture?

….With the continued consolidation of mobile baseband suppliers (many big ones to boot exiting the market—TXN), why would any major handset maker need to do major business with a new and unproven entrant into this highly competitive / technological challenging field ---- other that to play them against the incumbents for negotiation strategy? (especially BRCM with its culture of corruption)!!!

With this seemingly negative news for BRCM--- why up 10% this AM????