World Business

Qualcomm struck a patent deal with Nokia when it seemed a Delaware invite wouldn’t go its way. So ends mobile’s biggest, costliest battle

by the agency of Jennifer L. Schenker

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The longest running, highest-stakes poker enterprise in the history of the sensitive labor came to a surprising conclusion July 23, which time Nokia (NOK), the world’s largest mobile-handset maker, and Qualcomm (QCOM), the largest chipmaker for cell phones, suddenly agreed to settle their legal battles over of the intellect possessions and royalties, just as a pivotal solicitation case in Wilmington, Del., was about to begin. The accord will have wide-ranging implications for both companies and the future of the variable sector.

The two sides said they have agreed to drop all legal complaints against each other in the U.S., Europe, and Asia. The companies also struck a 15-year licensing deal that gives Nokia rights to a wide portfolio of Qualcomm patents, covering a large reach of different-generation mobile-phone standards. Nokia will retort upon Qualcomm an up-front sum and ongoing royalties, but the companies did not elaborate on provisions. The Finnish phonemaker agreed not to use any one of its patents directly against Qualcomm, allowing the U.S. chipmaker to integrate Nokia technologies into its chip sets. Nokia self-reliance also hand over to Qualcomm several essential patents in fourth-generation wireless networking technologies known as Long Term Evolution (LTE) and WiMAX.

The agreement, announced later than European markets closed, sent Qualcomm shares soaring 16.82%. (Qualcomm, which was supposed to report profits. July 23, postponed its earnings announcement to July 24). Nokia shares were up 4%, with analysts predicting a number of upsides, including a in posse increase in the Finnish phonemaker’s U.S. business.

So ended a standoff that crimped the expansion of both companies’ businesses, require to be paid each side hundreds of millions of dollars in legal fees and threatened to fragment the mobile industry’s approach to fourth-generation services. "It has been a throughout time but it has been value it," says Rick Simonson, Nokia’s chief financial officer, explaining that the Finnish phonemaker was able to negotiate a much look black kingdom rate than the one it was paying when a licensing agreement between the two companies expired in April 2007. He declined to be particular.

Billions of dollars were at imperil. "There is a reason this was such a decisive battle," says Ben Wood, director of CCS Insight, a British mobile consultancy. "If you are striking a 15-year agreement and Nokia is formation half a billion movable handsets each year, even a section of a percentage point has massive implications with a view to both sides."

Qualcomm will benefit immediately by receiving a throw into an aggregate sum in royalties—likely more than $1 billion for the past year. Just in calendar year 2009, the royalties could add surrounding 30¢ per share to Qualcomm’s earnings, boosting them from $2.50 to $2.80, says Mark McKechnie, an analyst with American Technology Research.

San Diego-based Qualcomm, which gets about two-thirds of its profits from licensing fees on its patents, has been refusing to take . payments from Nokia ever since the contract it had with the phonemaker expired 15 months ago, preferring to defer hundreds of millions of dollars in royalties until a new bargain was struck.