Qualcomm Inc (QCOM)

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Nokia Sounding Firm on Royalty Negotiations

http://www.cellular-news.com/story/19965.php

During last weeks conference call, Nokia was sounding a lot more aggressive in its stance over the ongoing royalty dispute with Qualcomm. Tal Liani from Merrill Lynch commented in a research note that Nokia has a much stronger intellectual property in WCDMA vs. CDMA and that therefore the royalty rate must be lower. Qualcomm will have to get the right to use Nokia's IPR in its semiconductors.


Nokia has not and will not give a free pass-through right to Qualcomm, meaning all of Qualcomm's semiconductor clients will have to pay Nokia royalties for using Nokia's patents. Merrill Lynch estimated that Nokia is ~7% of Qualcomm's revenues and ~10% of profits.

It is worth remembering that unlike most recent patent disputes between telcos, this dispute is not on the substance of the patents but rather the monetary arrangement between the two companies. Nokia acknowledges the existence of Qualcomm's GSM and WCDMA IPR but is looking to reduce the royalty rate.

Merrill Lynch does not expect any discount to Nokia to impact other royalty agreements though. The next two contracts between the two firms are only up for renewal in 2011 and 2013.