--Broadcom and Emulex reach partial agreement over patent
litigation
--Emulex will pay $58 million for licenses to certain
patents
--Companies have been fighting over networking technology
(Updates with company comments and additional details in the
fourth to eighth paragraphs.)
By Shara Tibken
Broadcom Corp. (BRCM) and Emulex Corp. (ELX) reached a partial
settlement over their patent ligitation, with Emulex agreeing to
pay Broadcom $58 million in cash for certain networking technology
licenses.
The two companies have been battling for years over networking
technology that links different pieces of hardware in data centers.
Broadcom initially filed suit against Emulex in late 2009, saying
the company infringed nearly a dozen of its patents. Emulex
countersued later in the year, alleging Broadcom acted to quash
competition in part of the networking market.
The initial suit came only a couple months after Broadcom failed
in its attempt to acquire Emulex. The hostile takeover bid was
widely seen as Broadcom's attempt to plug a hole in its portfolio
with so-called fibre channel chip products used in storage
networking.
The companies on Thursday said Emulex will receive licenses to
certain patents for use in fibre channel applications, resolving
the dispute in one of three patent families involved in the
litigation. Broadcom earlier this year had won a permanent
injunction against products using the technology.
Litigation remains outstanding regarding the other two patent
families.
The fields of use covered by the pact Thursday are partly
related to Emulex's XE201 Lancer chips. The company also agreed to
provide certain rights to Broadcom protecting the company from
Emulex patent assertions. Other terms of the agreement are
confidential and weren't disclosed.
The agreement doesn't cover Emulex's ethernet products,
spokeswoman Katherine Lane said. The ethernet business represented
about 20% of Emulex's revenue in its last publicly reported
quarter, Ms. Lane said. She declined to discuss the status of the
outstanding litigation.
Broadcom--a provider of chips for set-top boxes, networking and
smartphones--declined to comment.
Broadcom shares, up 15% this year through Thursday's close, were
flat at $33.69 in late trading. Emulex, up 5.5% over the same
period, slipped 4 cents to $7.20 after hours.
Broadcom has seen some success in its litigation against Emulex,
which has been an overhang over the smaller company. While its
shares are up in 2012, they're off their 52-week high of $11.19
earlier this year.
Broadcom in March said a federal court granted a permanent
injunction to halt U.S. sales of some of Emulex's products that
earlier were found to infringe on two Broadcom patents. Broadcom in
March also said that Emulex products affected by the injunction
included the BladeEngine2 and BladeEngine3 Ethernet controllers and
Lancer chips used in some adapter products. The ban also covered
some fibre channel switch products.
ThinkEquity analyst Rajest Ghai said a big risk was that Emulex
wouldn't be able to ship new product designs, which would hurt its
financial results and position in the market.
"This does relieve an overhang," Mr. Ghai said.
--Tess Stynes contributed to this report.
-Write to Shara Tibken at shara.tibken@dowjones.com