Qualcomm to pay Broadcom $891M in settlement
Qualcomm was quick to point out that the terms of its agreement with Broadcom will not result in any change to its 3G and 4G licensing revenue model.
By Suzanne Deffree, Managing Editor, News -- EDN, April 27, 2009
A bitter, long running legal war between Broadcom Corp and Qualcomm Inc ended Sunday, when the two companies announced a settlement and multi-year patent agreement that will result in the dismissal with prejudice of all litigation between the wireless rivals.
As part of the agreement, Qualcomm will pay Broadcom $891 million in cash over a period of four years. Of that total, $200 million will be paid in the quarter ending June 30. No other scheduled payments have been set by the agreement.
With the agreement, all litigation between the two has ceased, including all patent infringement claims in the International Trade Commission and US District Court in Santa Ana. Further, Broadcom will withdraw its European Commission and Korea Fair Trade Commission complaints regarding Qualcomm.
Qualcomm was quick to point out that the terms of its agreement with Broadcom will not result in any change to its 3G and 4G licensing revenue model.
In inking the agreement, Broadcom and Qualcomm have agreed not to assert patents against each other for their respective IC products and certain other products and services. Broadcom agreed not to assert its patents against Qualcomm's customers for Qualcomm's IC products incorporated into cellular products, while Qualcomm agreed not to assert its patents against Broadcom's customers for Broadcom's IC products incorporated in non-cellular products.
The agreement also mandates that Qualcomm's customers do not receive rights to any of Broadcom's patents with respect to Qualcomm IC products incorporated into non-cellular products and equipment, and that Broadcom customers do not receive rights to any of Qualcomm's patents with respect to Broadcom IC products incorporated into cellular products and equipment.
Management from both Broadcom and Qualcomm praised the resolution as a positive one for the companies, their customers and partners, and the overall industry.
“Today's settlement allows both companies to move on with their business and compete in the semiconductor sector as two of its innovation leaders,” Scott McGregor, president and CEO of Broadcom, said in a statement. “We have set aside our differences while addressing the needs of our customers, our shareholders and the industry. In addition, the companies have worked together to achieve their mutual goals of improving the competitive dynamics of the industry.”
“The settlement will allow us to direct our full attention and resources to continuing to innovate, improving our competitive position in this economic downturn, and growing demand for wireless products and services,” Paul E. Jacobs, chairman and CEO of Qualcomm, said in the statement. “I am pleased that we have achieved this important settlement. At a time when the wireless industry should be focused on moving forward, the agreement removes uncertainty for Qualcomm and its customers.”
Impact on Qualcomm's March quarter
Jacobs made similar points when reporting Qualcomm financial results for the company's fiscal Q2 this morning. Admitting that the settlement adversely impacted the company's results for the quarter ended March 29, he said it also eliminated some uncertainty, employee distraction, and legal cost.
The company's results showed revenue at the high end of its guidance for the quarter. Sales of $2.46 billion compared to $2.61 billion in the prior year's fiscal Q2 and $2.52 billion in the prior quarter.
March quarter operating loss of $10 million, which reflected a $748 million charge for litigation settlement related its agreement with Broadcom, compared to operating income of $813 million in fiscal Q2 2008 and income of $745 million in the prior quarter.
March quarter net loss of $289 million compared to net income of $766 million in fiscal Q2 2008 and income of $341 million in the prior quarter.
Looking to the June quarter, Qualcomm estimated revenue will come in between $2.4 billion and $2.6 billion. Those results would be down both sequentially and year over year, as the company said it expect the global financial crisis and resulting slowdown in the worldwide economy to continue to cause lower demand for CDMA-based products in various regions.
