Qualcomm, the second-largest cell phone chipmaker, warned on Wednesday it faced escalating legal costs and reduced profits after failing to make any progress in its royalty dispute with Nokia.
A cross-licensing agreement that allows the number-one handset maker to use Qualcomm’s technology expires on April 9 and negotiations between the two sides on an extension had not even come close to a resolution, Paul Jacobs, chief executive, told an earnings conference call.
This could mean Nokia not paying royalties on patents after April 9, while Qualcomm would lose its rights to sell integrated circuits under Nokia patents.
Qualcomm said this could take 4 to 6 cents off its diluted earnings per share in its fourth quarter ending in September. It also expected to pay more than $200m in legal costs this fiscal year. “This is more than we previously estimated but these attacks go to the heart of our business model and we feel quite strongly it is money well spent,” said Steve Altman, president.
He said there had been an orchestrated attack on Qualcomm by a group known as Project Stockholm that included the number one handset, infrastructure and chipset makers in Nokia, Ericsson and Texas Instruments. A major objective was to decrease the royalties they pay to Qualcomm.
“The current environment represents an unprecedented level of attacks on our business,” he said, adding the company felt it was unlikely it would resolve its dispute with Nokia by the deadline.
Qualcomm has come under attack through the courts and complaints to government bodies such as the European Union over the royalties it charges for its CDMA technology.
Qualcomm shares were 2 per cent higher in after-hours trading at $39.46.