Shares of Broadcom Corp. plunged Thursday on investor concerns that the Irvine chipmaker might not have as much firepower behind it in ongoing sparring over patents with rival Qualcomm Inc.
Investors hammered the stock after the San Diego-based cell phone chipmaker worked out a favorable licensing deal with Nokia Corp., the top cell phone manufacturer.
Broadcom’s stock closed down nearly 10% on a recent market value of about $12 billion. It continued to fall in New York afterhours trading.
Qualcomm’s licensing pact, which is good for the next 15 years, ends a three-year legal battle over Nokia’s use of certain cell phone chips.
The original agreement expired in April of last year. Nokia had been pressuring Qualcomm to give it a cut in the rate it was paying for royalties.
Under the new agreement, Nokia gets to use all of Qualcomm’s patents on chips for its phones and network equipment. In return, Nokia agreed to allow Qualcomm to use its technology in its chips.
Financial terms of the deal weren’t disclosed.
A Nokia spokeswoman said the royalty rates under the new agreement were lower than those under its previous agreement with Qualcomm, according to a Reuters report.
As part of the agreement, Nokia also said it would withdraw an anti-competitiveness complaint it made along with several other companies against Qualcomm to the European Commission.
The move could be bad for Broadcom, one of the companies that spurred the complaint.
Broadcom has spent a lot of legal dollars fighting Qualcomm in a series of patent infringement trials over the course of two years.
It’s made a considerable effort to rally allies among the top cell phone makers. With Nokia bowing out, it weakens Broadcom’s cause.
The agreement may pressure Qualcomm to strike a licensing deal with other chipmakers that could be worth less to Broadcom, given that it gave a bit of a discount to Nokia.
Qualcomm and Broadcom faced off in a Santa Ana court as recently as last week.
