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To: slacker711 who wrote (72994)1/2/2008 6:37:28 PM
From: slacker711
   of 122014
 
This is part of a long (but interesting) article on the battle between Intel and ARM. Q is aligned with ARM, but the fact that they have customised their design so completely puts them in an odd position. They have not yet signed up for ARM's latest A9 core.

wirelessinnovator.com

Qualcomm and ARM:

Qualcomm, despite its current travails, will be one of the most significant obstacles in Intel’s path in the handset world, and therefore an important member of the ARM group, even if an awkward one.

Qualcomm is one of the only companies to have a full architectural license from ARM – though Intel also had one via Digital – and this enabled it to leap ahead in terms of modifying the design for mobility when it moved into this field in 2005 with the release of its Scorpion microprocessor, and subsequently with its Snapdragon architecture. It opened a chip design facility in 2003 and acquired the rights to modify the ARM architecture in order to optimize an application processor for a smartphone chipset, which emerged as Snapdragon.

The 65nm Scorpion ARMv7 core delivers 2,100 DMips peak, while consuming under half a watt of power. This showed Qualcomm quadrupling the power/performance of its products based on unmodified ARM cores.
Key enhancements have focused on multimedia engines to accelerate processing of media applications while keeping power consumption low.

Scorpion is part of Snapdragon, which also includes a 128-bit SIMD (single instruction, multiple data) processor and a 600MHz DSP to accelerate multimedia applications. On the RF chip, Snapdragon will incorporate options for EV-DO, W-CDMA, HSDPA and HSDUPA, broadcast television and multimedia, Wi-Fi and Bluetooth.

This was unveiled a year ago and represented one of Qualcomm’s first moves to extend its reach beyond pure handsets into other consumer electronics and home media devices, and also a key challenge to Intel in the PC/smartphone crossover space.

“Qualcomm is driving a shift that is taking place in portable electronics by adding ubiquitous connectivity with zero compromise for the user experience to an extended range of devices,” said COO Sanjay Jha. Samsung was the first public customer, and is likely to use Snapdragon in its ultra-mobile PC, scheduled for early 2008.

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To: NickLemb who wrote (72988)1/2/2008 6:40:37 PM
From: JGoren
   of 122014
 
Deutsche Bank report of Brian Modoff

Limited near-term impact
Report issued after CC. Near term impact on numbers limited. Two of the patents, #010 and #317, largely focused on VoIP on EV-DO networks, an issue only for Sprint and Alltel (VZ has an agreement with BRCM). The #686 patent, on the other hand, also covers WCDMA networks, which could become an issue for phones headed to T and T-Mo, QCOM has released new chips which they claim can avoid the patent. Opines few technical challenges (no radio changes, pin-/softwarecompatible)which would prevent it from being adopted by OEMs. Handsets using it should be available later this quarter.

No change to DB's estimated numbers.
CY08 US WCMDA handset est is 20 m phones. QCOM's exposure is likely limited 2-3m CYQ1 units. They indicated that Q1 units are likely above Q4's 78m, while DB looking for 70m, implying some upside remains.

Legal issues will nevertheless remain an overhang.
While penalties worse than expected, the legal process has many rounds left. DB cautions investors from reading too much into any single event. QCOM's fundamentals remain solid. maintain our Buy rating.
*****
I think the company usually issues press release on date the dividend is distributed announcing its distribution. Previously, it would have announced the dividend, date of record, and payment date.

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From: JGoren1/2/2008 7:02:22 PM
1 Recommendation   of 122014
 
There is a question I have, which none of the analysts asked: For these carriers and manufacturers, once a workaround is designed, tested and approved, can the carrier upgrade the firmware in the chips on the fly upon sale and activation of the handset? Is it different for different carriers or manufacturers?

Where I am coming from is this: If the software workaround to the chips can be downloaded from the carrier upon activation of each handset automatically, I would strongly argue to the judge that there should be a stay on importation for 3 months so that the handsets manufacturers can continue to import handsets already in the pipeline for export to the US and so they can put the chips in handsets, so their manufacturing and sales operations are not disrupted. Once the handset is sold in the US, it has to be activated and at that time, the carrier automatically downloads the firmware update with the workaround into the phone. In other words, its not importation that is the damage, it is use of the infringing software and for more than a few mins that wouldn't happen, if the the new firmware can be downloaded on the fly. There should be an exception for such a process to cleanse the pipeline. The Company has already said it will take less than 3 mos for the workaraounds to get into the pipeline and that before the first quarter of 08 is finished, handsets will have the new chips.

IT seems to me a reasonable thing for the judge to allow if we can cleanse the chips as soon as the phone is turned on.

Please let me know what you think.

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From: JGoren1/2/2008 7:10:28 PM
2 Recommendations   of 122014
 
American Technology Research issued report on BRCM. Bank of America Qcom

ATR
Views order as positive for BRCM as it builds its fledging cell phone IC business and gains wider recognition for its extensive patent portfolio.

Ongoing litigation with QCOM will remain overhang, ATR believes BRCM has little to lose as it is a relatively
small business in cell phone ICs. End Game still about about minimizing CDMA "Tax" for Customers. Potential financial payments immaterial (4.5-6% after May 29, 2007). ATR's view is that end game is to ensure BRCM gets favorable cross-licensing terms so that its cell phone customers do not pay QCOM
excessive fees or "tax" for its CDMA technologies (similar to what we are seeing from China and others). ATR believes this injunction gives BRCM additional leverage in its ongoing negotiations.

****

I think it is right in believing it may help BRCM get some business; if nothing else, some handset makers might incorporate some BRCM stuff just to get them off their back. One might call it extortion. However, BRCM will remain reluctant to sue the handset makers.

Believes potential customers that were reluctant to work with BRCM for fear of lawsuits from QCOM may now feel freer to work with BRCM, already seeing evidence with NOK and Samsung working with BRCM on future platforms.
****

Bank of America Equity Research (Tim Long) Another Setback with Broadcom, But Limited EPS Impact.

While this is another lost opportunity for QCOM to gain leverage with Broadcom, BA encouraged by the workaround for WCDMA and sunset provision for EVDO. BA believes a stay on this ruling could be delivered. Re-iterate Buy rating.

US Impact only. Importantly, injunction only applies to chipsets sold to the US market. BA estimates about 10% of QCOM’s revenues coming from chipset sales to the US market, with CDMA likely ~3xWCDMA in volumes. VZ, largest end customer, is excluded.

WCDMA impact. Management announced new chips that workaround the ‘686 video encoding patent and they are available today, re pin, RF and software compatible. Commercial handsets should be available by the end of March 2008, but BA thinks QCOM is probably already shipping chipsets to handset OEMs. Could be some interruption to supply but nominal EPS impact. We note that there could also be a stay on this order as the ruling is somewhat unfair to WCDMA operators where QCOM is a major supplier.

CDMA impact. EPS impact of $0.02 - $0.03 to QCOM FY08 EPS.

BA believes the case validates Qcom's royalty model. We view the royalty rates for the limited numbers of patents in this case as very high. With QCOM’s business model being called into question, we believe the value of providing hundreds or even thousands of patents at a 4-5% royalty rate looks a lot more palatable.

BA believes BRCM litigation impact more defineda and anticipates less news going forward. QCOM remains a top large-cap pick based on rising estimates in the future and that the stock is priced based on a worst case scenario for the litigations.

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To: JGoren who wrote (73006)1/2/2008 7:28:17 PM
From: JeffreyHF
12 Recommendations   of 122014
 
I think ATR is dead wrong. Calling Qualcomm's low handset royalties a "CDMA tax", rather than compensation for numerous important inventions, is simply political spin, born of their own extortionate valuation of their own down market IPR.Why buy from Broadcom, who demands excessive royalties yet refuses to honor the product of years of sweat, R&D investment, and ingenuity of Qualcomm's engineers? Purchasers of Broadcom chips risk being disrupted and barred worldwide. Just because Broadcom wants to change the rules of the mobile market, before entering that space, doesn't make it right or likely.Who the hell do they think they are?

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To: slacker711 who wrote (72992)1/2/2008 7:31:29 PM
From: JGoren
2 Recommendations   of 122014
 
I think the minimalist nature is shown by the quick manner in which workarounds were developed. The rates set by the judge do seem to be high based on how relatively easily workarounds were designed.

As discussed previously, by me and others, BRCM was more interested in trying to make PR and carry water for Nokia than in negotiating reasonable licenses. As a result, it has been pointed out, Qcom simply worked around the patents and has gotten the PTO to investigate the validity of at least one patent.

I don't think that will be lost on the industry. If Qcom can get a couple of BRCM's patents invalidated, then Broadcomm will not only lose leverage but a lot of face. Manufacturers and carriers will start laughing at Broadcomm. That would be sweet.

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To: JeffreyHF who wrote (73002)1/2/2008 7:33:16 PM
From: Neeka
3 Recommendations   of 122014
 
I couldn't agree more JeffreyHF, and may we all have a hearty celebration when Q sticks it to BRCM on licensing fees.........if they choose to license them at all.

At this point, BRCM stinks worse than dead hagfish.

M

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To: slacker711 who wrote (72999)1/2/2008 7:55:49 PM
From: JGoren
1 Recommendation   of 122014
 
The important legal things are in 08. Awaiting decision from the UK court, which was tried early November I think. January 19th Quanta Systems vs. LG to be orally argued at the Supreme Court of the United States. Decision would be expected in May or June. If Nokia and Petitioner are rebuffed on downstream royalties, that ends the patent exhaustion argument and leaves Nokia only with its unfair practices, unFRandly allegations before the EU. And of course, there is the arbitration. Now, I realize there are lawsuits in courts regarding patent infringement, but I am focusing on those cases that seem to have the most direct impact upon negoatiations for a licensing agreement. The various patent infringement cases seem to be maneuvers to obtain leverage for negotiation, and from the experience that we have had, it seems to me that those cases are largely a wash.

I would expect Broadcomm to bring at least one more shot across the bow, timed for maximum PR benefit and in an effort to sidetrack Qcom from concentrating on Nokia litigation. BRCM will continue to try to enforce the ITC decsion and Santa Ana aand the San Diego, claiming Qcom has failed to comply with orders. These are quick skirmishes intended to keep Qcom busy and burden the lawyers. From BRCM's standpoint, they would allow it to make more press releases saying Qcom violates court orders, etc, etc. But, the street is beginning to see through that stuff, imho.

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To: JeffreyHF who wrote (73007)1/2/2008 7:59:25 PM
From: JGoren
   of 122014
 
remember it was from a Broadcomm analyst for American Technology Research, with tendancy to spout Broadcomm spin. Valuable to read his take, however.

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To: JGoren who wrote (73011)1/2/2008 8:24:04 PM
From: JeffreyHF
4 Recommendations   of 122014
 
Understood, JGoren, but it seems particularly hypocritical and unprofessional for an analyst to call Qualcomm's royalties a "CDMA tax", while casting aggressive Broadcom as a Robin Hood, fighting to rid an industry of Qualcomm's avaricious grasp.All royalties in the industry are the way capitalists compensate R&D funds risked on commercially valuable inventions.

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