Why Qualcomm Folded to Nokia

Tag : Nokia CDMA Phone

The longest running, highest-stakes poker game in the history ofthe mobile industry came to a surprising conclusion July 23, whenNokia ( NOK ), the world's largest mobile-handset maker, and Qualcomm ( QCOM ), the largest chipmaker for cell phones, suddenly agreed to settletheir legal battles over intellectual property and royalties, justas a pivotal court case in Wilmington, Del., was about to begin.The accord will have wide-ranging implications for both companiesand the future of the mobile sector.
 
The two sides said they have agreed to drop all legal complaintsagainst each other in the U.S., Europe, and Asia. The companiesalso struck a 15-year licensing deal that gives Nokia rights to awide portfolio of Qualcomm patents, covering a wide range ofdifferent-generation mobile-phone standards.

Nokia will payQualcomm an up-front sum and ongoing royalties, but the companiesdid not elaborate on terms. The Finnish phonemaker agreed not touse any of its patents directly against Qualcomm, allowing the U.S.chipmaker to integrate Nokia technologies into its chip sets. Nokiawill also hand over to Qualcomm several essential patents infourth-generation wireless networking technologies known as LongTerm Evolution (LTE) and WiMAX.
 
The agreement, announced after European markets closed, sentQualcomm shares soaring 16.82%. (Qualcomm, which was supposed toreport earnings July 23, postponed its earnings announcement toJuly 24). Nokia shares were up 4%, with analysts predicting anumber of upsides, including a potential increase in the Finnishphonemaker's U.S. business.