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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 128.49-2.7%3:59 PM EDT

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To: Jim Mullens who wrote (122630)11/1/2014 12:08:48 PM
From: N.Novick  Read Replies (2) of 173549
 
China
Jim.
Q loses money in the near term on any settlement (meaning earnings not stock price action) because Compamies that ARE currently in compliance (Xiaomi for example) are paying much higher export rates per current rate structure. Despite non compliance of some domestic firms, since those domestic rates are low, it doesn't hurt Q that badly in near term on EPS. The rationale of a deal economically is the long term unit growth, but that will take time. Given iphone bounce in next two quarters, Q will not get hurt that badly on EPS (and thus does not have a great incentive to settle) until into 2015.

This info came from the Citi report which was main report based on Q mgmt input since this issue because subject to public scrutiny on large scale.

It appears China is seeking to rearrange who has the ability to charge royalties and how much (meaning not just Q but among other Chinese companies). Chinese are trying to take substantial of LTE royalty pie using their proprietary TD patents as cover. Even though TD is not necessary, it was developed in China university and Chinese will mandate use of TD and seek to collect TDLTE royalties in China as well as reduce export rates claiming they have lots of TDLTE patents applying to LTE because of their TD work.

As has been stated here earlier by others, Chinese don't really,object to royalty process, they just want to horn in on it. As someone stated, this is simply about them stealing 3G and 4G intellectual property and trying to make that look legitimate. Chinese favor their firms that have TD IP and want those firms to be able to charge Xiomi and others royalties.

It's become apparent that the longer a deal can be held off and fought, without major hit to EPS, the better. Maybe there would be a little pop in Stock price with a settlement that sounds like a reduction of tensions on the surface. But the long term implications to business model of any settlement China would accept are negative .

No news is good news here. This is a serious threat to Qs IP. And Q needs to fight as hard as it can so as not to accede their IP. Q needs to convince analyst community that a settlement is not necessary for,business to thrive. They need to expand internet of things chips sales to diversify and be able to sustain reduced domestic China royalties. Better to lose domestic royalties in China than effectively give away much of the LTE IP and R&D investment.
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