Qualcomm settlement good for Broadcom, customers

27.04.2009

However, the settlement could make phone makers, and the carriers that buy their products, more secure.

"You're not going to be subject to potentially having chips held up at the border, as they almost were in the past, because of patent infringement," Gold said. Verizon Wireless, the world's biggest seller of CDMA phones, agreed in 2007 to pay Broadcom to cover Qualcomm's use of the disputed technology so it could continue to import phones despite a ban imposed by the U.S. International Trade Commission. It paid Broadcom $6 for every handset, PDA (personal digital assistant) or data card that used CDMA EV-DO (Evolution-Data Optimized) mobile broadband technology. That can't have made Verizon happy and was probably the kind of situation the chip vendors didn't want to continue, analysts said.

"It's good to have the customers sort of shielded and unaffected by this kind of battling," said Joe Byrne of the Linley Group. Strauss suggested Qualcomm may have been motivated to reach this settlement with Broadcom because the Verizon arrangement is due to expire.

Qualcomm also said it had developed a workaround to avoid using the disputed technology, which would have consumed the company's engineering resources with no real benefit, analysts said. "Obviously, the workaround chips probably weren't as good as those that didn't need the workaround," Strauss said.

In addition to helping both companies, the broad new settlement may also shake up the mobile chip industry, according to some analysts. Broadcom is a much smaller player than Qualcomm in the mobile-phone chip business, with annual cellular sales under $100 million compared with billions for Qualcomm, according to Linley Group's Byrne. But the company's role could grow significantly now that it has access to Qualcomm's intellectual property.