Monday, December 11, 2006

Nokia Qualcomm Holy War

Qualcomm (NASDAQ:QCOM) is under siege by Nokia (NASDAQ:NOK). A strategic cross patent agreement is set to expire in April of 2007. The terms of the agreement are confidential but those in the know believe that Qualcomm received 5% of CDMA technology. Now that 3G technology has muscled its way up the food chain, Nokia wants a better deal.

William Plummer, Nokia's external affairs VP, summarized the company's grievance : "Qualcomm is trying to project its current business model into the future in an uneconomical, irrational way."

Nokia has plenty of company; Ericsson (NASDAQ:ERIC), Texas Instrument (NYSE:TXN), Broadcom (NASDAQ:BRCM) have all filed similar legal actions across the USA, Europe and South Korea.

World wide revenues from 3G over the next few years are expected to reach approximately half a trillion dollars. Any royalty arrangement will also be huge. Changes or modifications however small in percentage terms are worth many millions of dollars over long periods of time. While much of the action will be contested in the courts, regulatory bodies around the world will also influence the future when they adjudicate what constitutes "fair and reasonable". The term is included in almost all agreements and has now become a legal Trojan horse.