Even after Qualcomm truce Broadcom faces uphill battle
Published: 27 April, 2009
READ MORE: Qualcomm
Ahead of its quarterly results announcement, postponed until today, Qualcomm has announced the expected settlement of its long running series of patent battles with Broadcom. This positive news, which removes Qualcomm's biggest legal distraction since its truce with Nokia last year, could divert attention from an anticipated decline in revenue and earnings in its quarter.
The impact of the Broadcom truce is less significant for Qualcomm's future business than its deal with Nokia, which paved the way for a new customer deal, but the end of the feud is valuable to both sides. It removes doubts over some key products that relied on disputed IPR, and will save huge legal costs - Qualcomm is estimated to have spent $100m last year along in this area. "The consensus right now is not really about an upside, but a cessation of the battle," said Ed Snyder of Charter Equity Research.
The battle has been complex and nasty, though on balance Broadcom scored more court victories, and so the headline items in the final settlement suggest a slight advantage to the smaller firm. Qualcomm has agreed to pay $891m over four years to its antagonist but with no recurring payments - a sum that will not unduly trouble the cash-rich giant. The two companies have agreed to end all litigation and exchange rights to one another's patents. As well as US lawsuits, Broadcom agreed to drop antitrust complaints it has filed against in Europe and South Korea, which in itself could save Qualcomm large sums spent on fighting regulatory probes and possible court cases.
Some analysts expect the deal to boost Broadcom's efforts to become a major supplier of cellphone baseband chips, a market in which it has so far achieved only tiny market share.
Most importantly, it gains the patent license from Qualcomm that is essential to competing in the cellphone market, under apparently favourable terms. The salvo of IPR lawsuits filed by Broadcom were mainly geared to getting a good deal on the CDMA family of patents. Under the new settlement, Broadcom will not have to pay Qualcomm patent royalties on the chips it sells, having argued that its larger competitor did not have the legal right to charge fees both for cellphones and the chips inside them, under the 'patent exhaustion' principle.
This could set an important precedent for the industry as a whole and how it deals with Qualcomm, though Qualcomm insisted: "The terms of this agreement will not result in any change to Qualcomm's 3G (CDMA2000, WCDMA, and TD-SCDMA technologies) and 4G (LTE and WiMAX technologies) licensing revenue model. While it will make Broadcom's cost structure attractive, it is still unlikely to be a major factor in improving the company's handset fortunes. Potential customers may be reassured by the end of litigation with the market leader, but Broadcom's key imperative is to sign up more customers and ship more silicon to those it has.
Pages: 1 | 2
More QUALCOMM News
More HANDSET News
More LTE News
COMMENTS
Carrier Broadband Performance: Africa & Middle East
Carriers are using mobile broadband as their weapon of choice in the fight against the commoditization of voice and falling ARPU. This...
Voice over LTE: Market Analysis and Forecasts
VoLTE offer unique advantages in lowering a carrier's voice infrastructure economics and promises to improve voice quality, device...
Satellite Phones: Will Dual Mode Help the Phoenix Rise from the Ashes?
Satellite phones have followed an arduous path since their much-hyped launch more than a decade ago. The hype was followed by an e...
