It is a long, steep hill for Qualcomm (QCOM). The ITC decided that some of Qualcomm’s technology infringed on IP from rival Broadcom (BRCM) and said it would block a number of handsets containing the technology from coming into the country.
Qualcomm said it would appeal to the President of the United States. Susan Schwab, the U.S. Trade Representative, acting on Mr. Bush’s behalf, said they would stay out of the matter. The issue will probably now go into the federal court system.
Several of the wireless carriers could be hurt because newer phones will not be available. Verizon Wireless has taken the step of cutting a license deal with Broadcom so that it will not be restricted in selling these handsets.
Qualcomm needs to get the matter settled, and soon. It battle with Broadcom is now spilling over and is damaging the businesses of both the handset companies and service providers.
Qualcomm has issued a strong forecast for the balance of the year. So, it does not expect this trouble to hurt it short term.
But, Wall St is already beginning to turn its back on the company. Despite the company’s excellent earnings, QCOM shares are down 6% over the last month and BRCM shares are up 8%. If Qualcomm persists, that spread could get much bigger.
Douglas A. McIntyre
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