Walls of Fury

Sunday, July 8, 2007

The movie theatres are showing trailers of "Balls of Fury", a purported spoof championing an under-ground ping-pong tournament. Hey, there is a good ping-pong game happening above the surface too! And the entire wireless industry has its eyes glued to it.

I am talking about the QualComm-BroadCom war following the ITC ruling. For several weeks now, this drama has never failed to entertain with new press-releases from both players coming out on a regular basis. Amidst all this, there is a call for the President to referee this tug-of-war. While, there are a few weeks more for his 'crucial' decision, both QCOM and BRCM are providing their versions of the case-facts to facilitate his decision.

The latest was this press-release from BRCM -

http://www.broadcom.com/press/release.php?id=1023034

The article seeks to explain the 'victimization' by QCOM and also the 'monopoly' in the CDMA market. It further presents the situation as stemming from QCOM's repeat offense and that their argument about emergency response is really a scare tactic trying to steer the issue away from being a mere business dealing that has to be ironed out. Though the article is biased for obvious reasons, it does bring out the sentiments of what most others think and believe QualComm is up to. The article also deliberately seeks to underplay the importance of the patent in question to justify the high royalty costs sought ($6 a piece). While there is a point citing that the percentage profit sought for this patent is much lower than the one QCOM sought for video compression, I do not see a justification for a power conservation patent demanding 2.5% of the unit cost. It should be noted in this context that QCOM charges about 5% royalty per chip-set for its entire suite of CDMA patents. Quite naturally, QCOM has rejected the offer citing a loss of $1.5-2 billion over 2 years. That would be a fortune for a single patent.

Of course, in a negotiation, the seller is likely to start high while the buyer tends to low-ball. Guess it is the bargaining norm. The question here pertains more to what these two will settle for. BRCM seems to be gunning more for a royalty-free cross-licensing which would now give them a much higher margin on each chip sold. QCOM, on the other hand, see this as a threat to their business model given that all of BRCM's profits come from their coffers.

So much for now. I shall get back on this topic as more information is available.

Posted by Vijay Nagarajan at 10:30 PM  

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