Saturday, July 28, 2007

Qualcomm: Broadcom doesn’t want to deal

A little bit more came out this week about the Qualcomm-Broadcom impasse, during the Qualcomm quarterly earnings call. Dow Jones reported:
Jacobs, speaking during a conference call to discuss its quarterly report, said Broadcom wants its customers to be exempt from paying Qualcomm licensing fees for a large chunck of its intellectual property portfolio as part of a settlement.

"That is unacceptable," Jacobs said. "We continue to believe the rulings are wrong."

President Steve Altman said that Broadcom is arguing that since it is exempt from licensing fees, it's customers should be, too.

But David Rossman, who heads of up intellectual property litigation for Broadcom, said, "a solution with Qualcomm will not eliminate their licensing program."
Obviously we’re not getting the whole picture about what’s being offered behind the scenes — but clearly Qualcomm believes that settling on the current terms would undercut its business model.

Technorati Tags: , ,

Thursday, July 26, 2007

We’re #1! We’re #1!

Finally some good news for Qualcomm. As Information Week reports:
Its legal troubles notwithstanding, Qualcomm has supplanted Texas Instruments(TXN) as the world’s leading supplier of integrated circuits for mobile devices, according to data from market research firm iSuppli.

This reshuffling marks the end of, or at least a pause in, Texas Instruments' long reign at the top of the mobile semiconductor market. The first quarter of 2007, according to iSuppli senior analyst Francis Sideco, “marks the first time that TI has not occupied the leadership position in this area since iSuppli began tracking handset market share in 2004.”
iSuppli credits Qualcomm’s monopoly on EV-DO chips (where TI is not currently supplying product) as well as its W-CDMA chips. Of course, TI’s CDMA line traces back to its 2000 acquisition of San Diego-based Dot Wireless for nearly $500 million.

So this is certainly good news for TI. At some point I do need to figure out one discrepancy: everyone has been listing TI as tops in the mobile phone IC market. However, ARM-licensed microprocessors are in more than 80% of all mobile phones being sold (one figure has it above 95%), so who could have more market share than that? So yes, TI is a licensee of ARM and today some of its most popular products are the OMAP application processors containing both a C55x DSP and an ARM9 core.

TI’s own claims are:
  • today the company has the majority of market share in GSM/GPRS mobile devices.
  • Additionally, more than half of 3G WCDMA handsets use TI basebands, and
  • even more use OMAP applications processors.

There’s a double counting problem here: obviously one company could have a majority share for the baseband processor and another majority for the application processor (unless it’s a dual-core processor). There’s even a potential triple counting of share between an IP licensee like ARM, a fabless semiconductor company like Qualcomm and a foundry (like IBM or TSMC used by Qualcomm); it’s only double counting (ARM and TI) for TI which makes its own chips.

Graphic: courtesy Fujitsu.

Technorati Tags: , , ,

Thursday, July 19, 2007

Broadcom cracks CDMA front

In their fight against Qualcomm, Broadcom scored an amazing victory today. They got Verizon Wireless to pay a $6/unit royalty up to $200 million every phone Verizon sells using Qualcomm chips.

Qualcomm turned down a similar deal three weeks ago because it could cost $2 billion. Instead, Qualcomm was reportedly hoping for a $100 million fee plus a future cross-license. (The Bloomberg article claims Qualcomm offered a royalty-free cross-license, which would be dramatically out of character for either Qualcomm or the industry).

For six patents, Broadcom could be making more per CDMA phone than Qualcomm makes (~ 5% of the price) for more than 1,500 patents. Of course, Verizon gives Broadcom another $200 million with which to sue Qualcomm (or perhaps even file more patents that block Qualcomm). (We do not know whether Verizon still has to pay the royalties if Broadcom’s patent claims are somehow dismissed or settled.)

If the Americans bought 143 million new phones last year, then Verizon’s 26% share would sell the 33 million phones in about a year before royalties were paid up. (It might take a little longer because royalties are capped at $50 million/quarter).

I’m guessing that Verizon — in a neck-and-neck market share war with the iPhone-equipped AT&T (27% share) — feels this would be a bad time to let its number #1 rival gain an advantage in new handsets and thus customer additions. This shows how much Verizon is willing to pay for certainty. It also means that Verizon no longer has a reason to support Qualcomm’s appeal of the ITC decision.

This is a very dangerous time for Qualcomm: if it loses the ability to charge royalties for firms that hold any 3G or GSM IPR, then it would probably lose the majority of its patent royalties (and as much as half of its net income). Nokia, Broadcom and others are hoping this will happen, and right now Qualcomm’s enemies are more powerful than its allies. For a decade, Qualcomm’s IP business model has counted on having the facts and IP law on its side, but the last year or two has reversed that trend.

Technorati Tags: , , ,

Tuesday, July 10, 2007

Writing a book backwards

Normally it’s a good idea to write a book front to back. But it seems like right now, I’m writing the book backwards.Escher Hands

The working title for our book remains Digitizing Communications: From MIT to Qualcomm. Since Caroline & I first discussed doing the book 2½ years ago, the outline for the main chapters has been chronological: it starts with Claude Shannon, eventually gets to Linkabit, talks about the early Linkabit spinoffs, a chapter dedicated to Qualcomm and then the 1990s telecom boom. We will then have some wrapup chapters generalizing about the cluster, and a final chapter looking forward.

In the Fall of 2000, I started writing my various Qualcomm cases. The first one, “Qualcomm in China,” was written to teach political risk in my Fall 2000 UCI international business class. It was eventually published in two parts by the Asian Case Research Journaland the University of Western Ontario. That’s where Dave Mock got the China story for his book The Qualcomm Equation.

Then I wrote a second series of cases (“Qualcomm 2000,” “Qualcomm 2001” and “Qualcomm 2002”) for teaching standards competition to another UCI MBA class; those ended up with the European Case Clearinghouse in 2002.

Meanwhile, Caroline was working on her dissertation, cataloguing the hundreds of wireless startup companies in San Diego from 1980-2003. We presented a paper from her dissertation at a 2003 conference in Denmark, a paper that now and again gets us calls from interested parties (and was also cited by Mock). Other material from her dissertation bears on the spinoff chapters, since (AFAIK) Caroline has the only complete database of some 240 startups (plus 100 branches of other companies) founded in the region.

When writing her dissertation, Caroline found — as has anyone who’s studied the San Diego telecom industry knows — that all roads lead to Linkabit. We wrote a paper on Linkabit in 2005 that we presented in June 2006 at the Babson entrepreneurship conference.

Sabbatical in hand, last summer I sat down to write up the Linkabit chapter for the book. As I wrote it, I tried to figure out what Andy Viterbi (S.B.,S.M. ’57) and Irwin Jacobs (ScD ’59) and starting Linkabit in October 1968. Like a thread on a knit sweater, I gave a tug and it kept unravelling. Six months later, I had a chapter on MIT and another chapter on information theory in NASA communications (which led to talks at MIT and NASA, respectively), but no Linkabit chapter.

Now I’m working on Chapter 1, about Claude Shannon and the birth of information theory. Hopefully I will finish the chapter in the next week, and then can start writing the book the way it was meant to be read: front to back.

Graphic: M.L. Escher, “Drawing Hands” (1948)

Technorati Tags: ,