Wireless chip supplier Qualcomm Inc agreed to pay smaller rival Broadcom Corp $891 million over four years to settle long-standing and increasingly bitter legal battles over technology patents.
Qualcomm, which has lost several key battles in patent infringement cases with Irvine, California based Broadcom in the last few years, said on Sunday it would make its first payment of $200 million to Broadcom in the current quarter.
On Thursday, Qualcomm had rescheduled its quarterly earnings call at the last minute saying it was in advanced settlement talks with Broadcom, with which it had been fighting since 2005 in a battle spanning three continents.
Charter Equity Research analyst Ed Snyder said it made sense for Qualcomm to end the legal uncertainty even though this was a big payout for Qualcomm, which analysts expect to report quarterly revenue of $2.35 billion on April 27.
"It's clearly costing Qualcomm a lot but it's best for both companies to move on." said Snyder. "It's a win for Broadcom."
The settlement will result in the dismissal of all litigation between the companies, including patent infringement claims Broadcom brought against Qualcomm at the International Trade Commission and a court in Santa Ana, California.
The companies also agreed not to assert patents against each other for their respective chip products and certain other products and services. And Broadcom said it will withdraw its complaints against Qualcomm to the European Commission and the Korea Fair Trade Commission as part of the deal.
The settlement does not necessarily mean that the Korean and European regulators drop their investigations. But Qualcomm general counsel Donald Rosenberg told Reuters in a interview he hoped they would look favorably on the Broadcom deal and on Qualcomm's settlement last year with leading cellphone maker Nokia after their drawn out legal fight.
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