Qualcomm, Huawei in Talks to Settle Patent-Royalty Dispute -- Update
March 06 2018 - 4:13PM
Dow Jones News
By Ted Greenwald and Dana Cimilluca
Qualcomm Inc. is in talks to settle a dispute with Huawei
Technologies Co., which has been withholding a hefty stream of
royalty payments from the chip maker, according to people familiar
with the matter.
The negotiations between Qualcomm and Huawei are well along and
could result in a settlement in the coming weeks, the people
said.
The talks could still fall apart and there is no guarantee of an
agreement. Qualcomm is in the midst of a contentious takeover
battle with Broadcom Ltd. that has global political ramifications,
and it isn't clear what implications that could have for Qualcomm
and Huawei's willingness and ability to strike a deal.
Huawei couldn't immediately comment on the talks. A Huawei
representative said Qualcomm is a valued partner and that Huawei is
a significant customer.
Qualcomm declined to comment.
Huawei was the second Qualcomm licensee to hold up royalties,
coming after Apple Inc. ordered its contract manufacturers to stop
paying the San Diego chip maker. The contract manufacturers had
been paying through 2016.
News of the settlement talks comes as Qualcomm has spent months
fending off a $117 billion takeover proposal from Broadcom, which
is based in Singapore but has vowed to move to the U.S.
The U.S. government committee that vets foreign acquisitions of
U.S. companies on national-security grounds on Sunday ordered
Qualcomm to postpone its annual meeting scheduled for Tuesday,
where shareholders were set to vote on whether to replace six of
the company's 11 directors with nominees put forward by
Broadcom.
Should it manage to reach an agreement with handset makers, it
could strengthen Qualcomm's hand ahead of the shareholder meeting,
now set for April 5.
Qualcomm has said resolving its disputes with the handset makers
could restore billions of dollars in royalty revenue. That is a key
piece of the company's plan to deliver between $6.75 and $7.50 in
adjusted per-share earnings in fiscal 2019.
In addition to selling chips, Qualcomm collects royalties for
use of its patents on key technology in cellular standards. It
holds patents on cellular systems beyond its chips, which allows it
to collect a fee for nearly every smartphone sold world-wide,
whether or not they contain its chips.
In recent years that patent-licensing regime has been under
attack not only from Apple and Huawei but regulators in several
countries, which have leveled fines against Qualcomm and forced it
to change some of its practices. Qualcomm is appealing some of
those cases.
Qualcomm disclosed a dispute with an unnamed second licensee
last year with its second-quarter results, after Apple in January
2017 sued the chip maker in the U.S. and later in other countries.
Apple alleges Qualcomm uses its dominance in smartphone chips
unfairly to extract exorbitant patent royalties from licensees.
Qualcomm has consistently declined to name Huawei, saying its
policy is to keep such disputes private until they land in
court.
The chip maker in 2015 had reached a settlement with Chinese
antitrust authorities, including a $975 million fine, that
compelled some Chinese licensees that had withheld royalties to
start paying.
--Tripp Mickle contributed to this article.
Write to Ted Greenwald at Ted.Greenwald@wsj.com and Dana
Cimilluca at dana.cimilluca@wsj.com
(END) Dow Jones Newswires
March 06, 2018 16:58 ET (21:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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