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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: JeffreyHF who wrote (122652)	11/3/2014 1:59:19 PM
From: slacker711	Respond to of 193441

I think that Foxconn's ASP would be below Q's royalty cap. OTOH, I believe Q has said that contract OEM's have higher royalty rates than the handset vendor. Slacker

To: JeffreyHF who wrote (122652)	11/3/2014 3:27:42 PM
From: Jim Mullens	Respond to of 193441

Jeffrey, re: Foxconn vs Apple royalty……………… There's still a question of ASP caps on royalties. Do we know whether having Foxconn pay, rather than Apple, actually lowers QTL's revenue? >>>>>>>>>>>>>>>>> Good point. I don’t think we do. This article provides the iPhone 6 and 6+ BOM detail, $227 / $242 respectively. http://www.forbes.com/sites/chuckjones/2014/09/24/apples-iphone-6-teardown-and-other-costs-analysis/?partner=yahootix Adding 10% for Foxconn’s markup yields 250 to $260. I also recall that in instances where the royalty base was on the 3rd party manufacturer and not the retail seller, the royalty rate was higher. I’m not sure if the cap is $250, $300, or $400. One other item, QCOM’s device ASP metric in based on Apple’s unsubsidized selling price of $600 -$800 and not Foxconn’s sales price to Apple. This has two affects of the device ASP metric. 1. Using the higher ASP lowers QCOM’s implied royalty rate 2. With ASPs above caps, ($ Apple – Foxconn issue) declining ASPs increase the implied royalty rate. Alt 1 ………………………….Units….ASP….. sales $.......royalty Base…Royalty @ 3.5% iPhone ASP……………..100….$650…..$ 65,000 Royalty Cap…………………….$260……………….$ 26,000………….$ 910 Other units………………900…..$190….$171,000…..171,000………….$5,985 Total units……………...1,000….$233….$233,000…..197,000………….$6,895 Device ASP/ implied royalty %…$233…………………………………..3.0% Alt 2 ………………………….Units….ASP….. sales $ iPhone ASP……………..100….$600…..$ 60,000 Royalty Cap…………………….$260………………..$ 26,000………….$ 910 Other units………………900…..$190….$171,000…...171,000………….$5,985 Total units……………...1,000….$221….$221,.000....$197,000………….$6,895 Device ASP/ implied royalty % ..$221……………………………………..3.1%