Qualcomm and Broadcom announced Sunday that they have agreed to end patent litigation between the companies worldwide, with Qualcomm paying Broadcom $891 million, according to the announcement.
On Wednesday, Qualcomm delayed its second-quarter earnings statement, citing advanced settlement discussions with Broadcom.
Qualcomm made this statement Sunday: "Qualcomm and Broadcom today announced that they have entered into a settlement and multi-year patent agreement. The agreement will result in the dismissal with prejudice of all litigation between the companies, including all patent infringement claims in the International Trade Commission and U.S. District Court in Santa Ana, as well as the withdrawal by Broadcom of its complaints to the European Commission and the Korea Fair Trade Commission."
Qualcomm will pay Broadcom $891 million over a four-year period, according to the San Diego-based company. The terms of the 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, Qualcomm said.
The agreement stipulates, among other things, that Broadcom and Qualcomm agree not to assert patents against each other for their respective integrated circuit products and certain other products and services and Broadcom agrees not to assert its patents against Qualcomm's customers for Qualcomm's integrated circuit products incorporated into cellular products.
"We believe that this resolution is positive for both Qualcomm and Broadcom, our customers, our partners and the overall industry," Paul E. Jacobs, chairman and CEO of Qualcomm, and Scott A. McGregor, president and CEO of Broadcom, said in a joint statement.
"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," Jacobs said.
The agreement ends longstanding litigation between the companies. For its part, Broadcom had argued in one case that Qualcomm was unfairly limiting competition by putting onerous conditions in its patent licensing agreements. Qualcomm licensed its chipset patents to other chip suppliers with the stipulation that they must limit sales of their products to mobile handset makers that also have Qualcomm patent licenses.
Broadcom had also asserted that the cloud of litigation hanging over it was a sticking point for prospective customers--and did win a judgment against Qualcomm in 2007. Qualcomm, however, had won court rulings of its own, having suits against it dismissed.
Microprocessor technology supplier Transmeta said it has received the initial payment of $150 million from Intel toward the $250 million settlement that the two companies agreed upon back in October. The payment was received on January 28, according to Sujan Jain, Transmeta's chief financial officer. Mr. Jain also said that Transmeta is evolving its business model to generate a more constant revenue stream.
Transmeta LongRun2
(Credit: Transmeta Corp.)Transmeta, previously a supplier of low-power x86 processors, now develops and licenses microprocessor technologies and related intellectual property. The company filed a lawsuit against Intel in October 2006 alleging that the latter infringed upon Transmeta's patents. Transmeta later settled with Intel for $250 million.
Last week, the company came under attack from one of its largest stockholders, Riley Investment Management, for what Riley claims is an unconvincing business strategy based on Transmeta's LongRun2 technology--described by Transmeta as a suite of technologies for advanced power management and "leakage control." Riley claims that there is no "credible evidence" that shareholders will benefit from the LongRun2-related operating expenses.
But Transmeta says it is making headway with LongRun2. Using this technology, NEC announced in July 2007 that it is targeting production of approximately one million mobile phone chips a month by 2008. As a result, Transmeta expects approximately $215,000 in LongRun2 royalty revenue that will show up in its first-quarter earnings, said Mr. Jain. That would be an improvement over its third-quarter earnings when Transmeta posted only $44,000 in revenue, including $43,000 of services revenue and $1,000 of license revenue for royalty payments.
Mr. Jain also said that Transmeta has been evolving its business model. Previously, Transmeta only dealt with big companies that had plenty of engineering know-how, due to the complexity of the technology transfer. But now it is focusing on building IP (intellectual property) modules to license to smaller, fabless chip companies too. The new strategy will help expand the LongRun2 business and should result in "more consistent revenues over time," Mr. Jain said.
Transmeta will provide details on how and when it will recognize the entire $250 million settlement from Intel during its 2007 fourth-quarter earnings conference call, said Mr. Jain.
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