|BRCM v QCOM / ITC remedy-- email to Bloomberg|
I wanted to offer a few comments in response to two recent Bloomberg articles discussing the BRCM v QCOM litigation.
#1. BRCM In Talks With Phone Makers after Ruling
#2 Broadcom's McGregor Says He Wants an End to Qualcomm Royalties
I’m a long time QCOM shareholder dating back to the 1996/7 timeframe and have followed QCOM and the wireless industry very closely to this date.
As you know, BRCM is also a party along with Nokia and several other companies whose objective is also to disrupt (destroy) QCOM’s business model which is to a large extent based on royalty revenue from CDMA based handset sales. Although the major parties to these many actions against QCOM are by far the world’s current dominant companies in mobile wireless ( NOK- #1 handsets and #2 infrastructure, TXN- #1 chipsets, ERIK- #1 infrastructure and #1 in WCDMA handsets), they hypocritically are attacking QCOM on the grounds that its business model is anti-competitive. However, the real reason for their many concerted attacks against QCOM’s business model is that it fosters more competition into the wireless market as 3G technologies (CDMA2000 / 3GSM/ UMTS/ WCDMA/ HSDPA) displace sales in their traditional GSM markets. In essence, these incumbents know they cannot compete in the 3G market against QCOM technology wise, so they have resulted to using the courts and PR smear campaigns in attempts to destroy QCOM’s business.
QCOM’s business model has been consistent throughout its 20 plus year history, with by far the most extensive licensing program in the industry (over 160 companies) on what has always in the past been considered FRAND (Fair, Reasonable, and Non-Discriminatory) terms. In fact Nokia, although now it now publicly and deceitfully claims that it cannot renew its QCOM license because “things are much different now than when it originally signed its QCOM license in 1992", it actually renewed its QCOM license (FRANDly) in 2001 (only a few years prior to initiating its [also BRCM] 2005 EC complaint) after the WCDMA standard was approved and virtually everything 3G technology wise deployed today was know then.
QCOM’s business model uses the royalty revenue to fund its extensive R&D activities that has been essential in the development of all 3G technologies, and to support their handset and carrier partners in manufacturing, testing, and network deployments. I seriously doubt that anyone in the industry believes that the tremendous advancements in wireless communications could have been achieved without the essential contributions from Qualcomm.
Specific comments on the two Bloomberg articles>>>
1. ``There have been new designs since June 7,' he said. ``Some of those who opposed us are our customers going forward.' He wouldn't identify any specific companies.”
This is very typical of BRCM, as deceitfully they cannot back-up much of that they say. They first stated they would soon be a major force in the 3G baseband market in 2005, and continued such public boasting until they recently revealed to their investors they don’t expect any meaningful presence until sometime in late 2008 / 2009. They continually deceived their investors on the magnitude of their options backdating scandal, and the impact it would have on their GAAP financials.
It’s also interesting to note the contrast in transparency of investor information provided by the two companies, not only the amount / frequency of presentations but the fact that BRCM does not provide anything in writing either during their presentations or for later downloading.
1.1 As a further example of deceit >>>
Per this Bloomberg article, BRCM as of last year had only a 1 percent share of the wireless baseband market, yet in a recent PR (linked below) BRCM boasts as currently being a “top 3G supplier “.
“Broadcom wants to win as much as 15 percent market share for the principal chip inside mobile phones by 2009 or 2010. The company had 1 percent in 2006, according to researcher iSuppli Corp. in El Segundo, California. Texas Instruments Inc. leads the market with 31 percent, followed by Qualcomm with 27 percent.”
Broadcom Now Among the Top 5 3G/UMTS Merchant IC Suppliers
As 3G Cellular Deployments Accelerate, Broadcom is well Positioned for Success in this Growing Market
Snip>>> "In a few short years, Broadcom has entered the highly competitive cellular baseband market and has now established a solid foundation for itself as a top 3G supplier," said Yossi Cohen, Senior Vice President & General Manager of Broadcom's Mobile Platforms Group. "
1.2. Re: the above, QCOM’s Lupin more succinctly echoes my remarks >>>
Broadcom's claim about working with phone makers critical of the ban should be taken ``with a big dose of salt,'Qualcomm General Counsel Louis Lupin said in an interview.
2. ``It's regrettable that their supplier (QCOM) has put them in this position,' McGregor said.”
It would appear that BRCM was also a significant participant, and from the ITC intervener statements supporting QCOM, many handset manufactures and carriers feel likewise.
3. ``We would love to have seen an entire ban, because basically it means that everybody's using our intellectual property and we get nothing,' he said.
A simple solution could have been achieved had that been BRCM’s objective, rather the hold QCOM, handset manufactures, ALL U.S. carriers / subscribers hostage by one patent (valued at $160,000) out of 150 purchased for $24 million.
4. “Broadcom argued that the only way to stop the patent infringement was to block imports of the phones containing the Qualcomm chips.”
I think most would agree that there are many other solutions available and as QCOM stated- “The public injury that would result from the remedy imposed by the Commission is grossly disproportionate to any benefit flowing to Broadcom’s claims...” . In fact, the validity (determined by a jury of lay people w/o technical / legal knowledge) of the one patent in question is suspect and subject to the further appellate court review.
4. ``That is a terrifying outcome for the industry,' he said. ``Qualcomm is a serial patent infringer. They're not willing to pay other people.'
+ “ Broadcom Corp. plans to use leverage from winning a ban on mobile phones with some Qualcomm Inc. chips to force its rival to end its royalty-based business model”
+ Asked whether Broadcom wants to destroy Qualcomm's royalty model, McGregor said in the interview, ``If their business model is based around unfair trade practices, yeah.'
QCOM has stated on many occasions that are willing to license BRCM, but not on BRCM’s terms that would destroy their long established and industry accepted business model.
5. “We believe that the rest of chipmakers for cell phones will benefit from what we are doing,' he said.”
QCOM’s chipmaker competitors would no doubt benefit if QCOM’s business model were destroyed. In so doing, however, future innovation in the wireless industry will be permanently harmed without QCOM’s essential R&D so vital on so many fronts in advancing man kinds progress and well being .
For additional background on Qualcomm, please don’t hesitate to ask.