Tech Rumor of the Day: Qualcomm

Qualcomm's (QCOM Quote) secret formula -- the royalty rate used to collect fees from phone makers using Qualcomm technology -- was revealed at a recent investors' conference.

The info and the lack of immediate reaction was a bit of a shocker since the San Diego chipmaker does not disclose the specific terms of its licensing agreements. But COO Len Lauer, while speaking at a Merrill Lynch Global Technology Conference on June 3, volunteered that the royalty rate for 3G CDMA licenses is between 4% and 5%.

Stunning? Not really.

Wall Street analysts and particularly Qualcomm investors have widely known the approximate range since it is such an important part of the business.

Royalties represent one-third of Qualcomm's revenue, or $3.98 billion in sales last year. The real mystery was what the future rate will be as the wireless industry moves away from Qualcomm's 3G strength, to 4G technology known as LTE.

And on that, Lauer delivered again. He said during the question and answer period that Qualcomm was asked to provide an LTE rate for a European standards group, so the company put the rate at 3.25%.

That's a pretty dramatic revelation depending on your assumptions.

For many, there were concerns that 4G would mark an end to the 3G gravy train since Qualcomm's LTE patent portfolio wasn't nearly as strong. The 3.25% is much better than the 2% or less some had feared.

But others had anticipated less of a drop down from the CDMA rate.