QCom - A loss... and a win

Wednesday, September 12, 2007

This week has QualComm (QCOM) all over the news again. Yesterday, Motorola came out with the shocker that they were giving the boot to QualComm in favor of Freescale and TI for their 3G offerings. This was an announcement leading the American Technology Group to downgrade QualComm's shares. They had earlier viewed Motorola as a positive, earning the San-Diego company up to $700 million in sales.

This news did come as a dampener for QualComm investors, but they were in for a pleasant surprise today. A court of appeals has granted a stay on the ITC ban until a final appeals ruling is given. Quite a rare victory for the embattled company! More importantly, this comes as a relief to all the phone-manufacturers and carriers caught in the cross-fire. This being said, it does not still exonerate QualComm from the implications of the ban. The company ultimately has to settle with BroadCom, but this is a quick-fix solution for all others who risked losing competency in the wake of the ban.

Few points to note -
  • Though absent from the beneficiaries list, Sprint will be able to sell phones from any of the manufacturers who won the stay today.
  • QualComm chips cannot be imported directly into the US. Not a major issue, but highlights the fact that this stay merely seeks to limit the damage caused to the others.
  • QualComm does not have to settle with BroadCom and will perhaps let the law take its course.

In other QualComm news, their case against Nokia went to courts yesterday as well. So, there will be more interesting legal outcomes this year. One thing that I want to re-iterate is that this ruling will not hamper the ruthless efforts to break the company's business model. Even the phone-manufacturers who won the stay will want more competitors in the chip-vendor space. Note that Motorola, one of the beneficiaries is already moving away from QualComm.

More analysis to come soon.

Posted by Vijay Nagarajan at 6:29 PM  


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