As we speculated when Qualcomm delayed its earnings report, the company has settled its legal spat with Nokia (NYSE: NOK).
Here’s the key paragraph from the release: “Under the terms of the new 15-year agreement, Nokia has been granted a license under all Qualcomm’s patents for use in Nokia mobile devices and Nokia Siemens Networks infrastructure equipment. Further, Nokia has agreed not to use any of its patents directly against Qualcomm, enabling Qualcomm to integrate Nokia’s technology into Qualcomm’s chipsets. The financial structure of the settlement includes an up-front payment and on-going royalties payable to Qualcomm (NSDQ: QCOM). Nokia has agreed to assign ownership of a number of patents to Qualcomm, including patents declared as essential to WCDMA, GSM and OFDMA. The specific terms are confidential.”
The market is taking this as an unalloyed win for Qualcomm, sending shares soaring by 18 percent after hours.
Meanwhile, Qualcomm has released its earnings figures that were supposed to have come out a few hours ago. Revenue for the quarter was up 19 percent to $2.8 billion. Pro forma net income was up 2 percent to $915 million ($.55 per share). A conference call will be held tomorrow morning at 8:00 AM ET, so expect a lot of talk about the settlement then.
James adds: I wouldn’t call this an unqualified win for Qualcomm. The way a lot of the patent battles have been going I would bet that Qualcomm is getting a lot less from Nokia for its patents than it did previously, which will probably help Nokia’s bottom line also. Back in November Qualcomm estimated the amount it wanted from Nokia would add about 25-30 cents per Qualcomm share to its earnings. In April last year Nokia made a $20 million payment to Qualcomm (what it thought the patents were worth), which was about 10 percent what it would have paid under the previous agreement and therefore we can deduce Nokia was paying about $800 million per year. Aside from the two delays there is the “coincidence” that a German court ruled Qualcomm’s GSM patent claim against Nokia to be invalid — the third court to do so. The battle started back in November 2005, so it’s probably not worth going over it in too much detail, but here are some major developments (in reverse chronological order):