Qualcomm (QCOM) has told the delegates at the huge 3GSM World Congress that the company’s legal battle with its largest customer Nokia (NOK) will continue. According to BusinessWeek: "Should Nokia refuse to sign the deal, the financial impact could be four to six cents on its expected profits per share during the 2007 fiscal year according to a recent results call."
The issue is whether Nokia phones will use Qualcomm technology after the contract between the two companies expires in April, and whether Qualcomm is using its monopoly position to charge cell handset manufactures prices above "fair market".
Qualcomm’s game of chicken is dangerous for its shareholders. It not only faces the Nokia action but patent litigation against major competitor Broadcom (BRCM) as well. It is difficult to see how pursuing these matters so aggressively and without mediation serves the QCOM shareholders.
Wall St. seems to agree. Over the last year, its stock has dropped from $53 to $38. At some point, a shareholder revolt may catch fire. If so, Qualcomm can defend itself on yet another front.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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