Qualcomm, Broadcom may be near settlement

Instead of issuing its second-quarter earnings report on Wednesday, Qualcomm abruptly rescheduled it, citing advanced settlement discussions with rival Broadcom.

For several years, the two chip makers have been embroiled in acrimonious patent battles.

The settlement would cover all disputes between the companies and, if completed, would have an impact on Qualcomm's financial results, the company said in a statement. Qualcomm warned that there are no assurances the companies will come to an agreement.

Not counting the potential impact of such an agreement, revenue and operating income for the second quarter met or exceeded earlier guidance, Qualcomm said. It will release earnings and host a conference call about financial results on Monday.

While the announcement was issued by Qualcomm, it said that neither company would comment further.

It's hard to predict which company might emerge the winner in a settlement, said Francis Sideco, an analyst at iSuppli. "One thing I'm pretty confident about is that whatever comes out, both companies are going to spin it ... to make sure they come out looking like they won," he said.

The ongoing legal battle doesn't appear to have had much of an effect on Qualcomm's bottom line, but a settlement could be material in several ways, he said. Depending on the agreement, Qualcomm might receive or have to make a one-time payment.

The deal could also have bearing on products that are in the works and that could affect future contracts and outlook, Sideco said.

A settlement, regardless of the details, also should be generally good for the mobile industry, he said. "From a big-picture standpoint, having these things settled gives a feeling of stability back and allows them both to move forward with their strategies," Sideco said.

For the past couple years, it has appeared that Qualcomm has been fighting a losing battle against Broadcom. At one point, the U.S. International Trade Commission barred the importation of certain Qualcomm chips for infringing on a Broadcom patent. Then a judge ordered an ethics investigation into Qualcomm lawyers after finding that the company had intentionally withheld tens of thousands of important documents in a case involving Broadcom. Qualcomm has also been found in contempt of an injunction preventing it from selling and supporting certain products that rely on Broadcom technology.

IDG News Service

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