A couple of weeks ago, I wrote about Irvine’s Broadcom Corp. and San Diego-based Qualcomm Inc. resolving several of their legal spats. That touched off a little debate about who has come out on top in the long running war.
Neither side wants to talk about the litigation that wrapped last month, literally days before a trial was to begin. Four patent suits were resolved, ending more than two years of wrangling over chips used in wirelesss phones.
Broadcom now has settled all claims with Qualcomm that were pending in federal court in San Diego. For more than two years, the two have accused each other of violating patents and stealing trade secrets on chips used in phones.
Trials in federal court in Orange County still are pending. And late last month, arguments on penalties before the International Trade Commission wrapped up in a case in which Qualcomm was found to have violated Broadcom patents.
Another case in federal court in San Diego wrapped up recently with the court adopting a jury decision that Broadcom didn’t violate two patents on video compression that never were disclosed to an industry standards body. The court begins hearings on penalties in May.
So is Broadcom ahead in the chip battle of Southern California? It seems it might have an edge on first blush. But no one is going out on a limb to say so.
“Not yet,there’s no clear winner, yet,” said Satya Chillara, a Pacific Growth Equities LLC analyst in San Francisco who covers both chipmakers. “At the end of the day, it is very important for Broadcom to get Qualcomm to come to the table so that Qualcomm will license (third generation) chip technology to Broadcom at an attractive cost. At this point, I don’t see how Broadcom can get them to the table. There’s no incentive.”
At least with the bulk of the litigation resolved, you’d think things would calm down a bit at Broadcom’s new University Research Park digs. Don’t bet on it, UBS Securities LLC analyst Alex Gauna said.
“I don’t know that I’d ever describe Broadcom as a company that has calm settling over it,” he said. “As always with Broadcom, there are a lot of balls in the air. But I think there are more things going right for the company than going wrong,maybe even more going right for the company than ever before.”
Among the items on Broadcom’s plate are its dual-format player for next-generation DVD and its work on Apple Inc.’s iPhones, launching this summer.
Motorola Contagion
With close of the quarter, Anaheim-based Multi-Fineline Electronix Inc. warned in late March of a sequential sales downfall and said net income could decline as a result.
In February, M-Flex, as the circuit board maker is known, said it was expecting some modest growth for the quarter.
M-Flex blamed lower-than-expected sales on woes at its largest customer. The company didn’t name names, but there’s little doubt it’s Motorola Inc., which accounts for about 70% of M-Flex’s $500 million in yearly sales.
The entire sector has been slowing down since late last year. In the December quarter, M-Flex saw a 79% drop in profits. At the time, Chief Executive Paul Harding said the results were due to a 24% drop in sales to Motorola (though he didn’t name the company).
He said he was expecting a turnaround in the March quarter. Wall Street analysts were expecting earnings of about $3.4 million on sales of nearly $125 million.
Then last month, Motorola warned that its full-year results would fall far short of its forecast as its mobile phone business struggles. Investors punished M-Flex a day after their warning, sending shares down more than 11%.
The company had a market value of $370 million last week.
All of this has as a background the continuing saga of M-Flex’s reluctant proposal to combine with sister company MFS Technology Inc. Both are part of Singapore’s WBL Corp.
M-Flex recently filed an updated plan for the combination with the Securities and Exchange Commission and again urged minority shareholders to vote against the deal.
The company has fought the deal almost since it was proposed by WBL last year. M-Flex sought to back out after MFS saw a huge slowdown in sales last year and M-Flex saw its own slowdown.
M-Flex even has sued WBL as well as some hedge fund investors that support the deal.
Fond Adieu
M-Flex was one of the first companies I wrote about when I joined the Business Journal late last year. Seems appropriate it’s the last company I write about before leaving. I’m headed back up the San Diego (I-405) Freeway for family reasons.
The Business Journal’s Sarah Tolkoff, who covered technology for the paper last year, is taking over the beat.
Although my stay here was short, I leave with a box full of memories: Early-morning bike rides with a source. Flying high above Orange County in a fighter plane for a review. The high-pitched craziness of the International Consumer Electronic Show in Las Vegas. The race to get a story up online and then put it in perspective for the next print edition. Lots of conversations with Editor Mike Lyster about music. Thanks to him and the staff and you for letting me sit in and jam for a while. It was a short but great gig.
