Qualcomm Plans Business Restructure - Analyst Blog
July 03 2012 - 6:30AM
Zacks
In order to protect its patent
licenses from further infringement as well as to boost its open
source platform for chip design, Qualcomm Inc.
(QCOM), which primarily develops chips for CDMA-based smartphones,
plans to create a separate operational unit called the Qualcomm
Technologies Inc.
The new business division, which
will come into force from the first quarter of 2013, will consist
of the research-and-development unit and the Qualcomm CDMA
Technologies (QCT) segment, which comprised of the semiconductor
business. The holding company will continue to manage the Qualcomm
Technology Licensing (QTL) business segment and will also look
after the corporate affairs of the company. Moreover, it will also
retain most of its patent licensing portfolio while parting with a
handful of patent portfolios to Qualcomm Technologies Inc. to share
it with the third party (open source community) for creating an
open source platform, thereby enhancing its future chip design.
Most technology companies remain
exposed to the threat of intellectual property infringement and
Qualcomm is no different. Earlier, the company faced many legal
battles, which resulted in heavy litigation expenses. In, 2009,
Qualcomm lost a long pending court-case against Broadcom
Corp. (BRCM) for violating its patent that resulted in an
$891 million bailout for the company.
So to avoid such legal issues,
Qualcomm decided to start a separate business unit primarily
dealing with technology licenses as well as giving the opportunity
to Qualcomm Technologies Inc. division to work closely with
the Android application developer, in order to create advanced
processors for future.
Qualcomm is already providing
necessary tools and technical support to Android application
developer to closely integrate the programs they develop into the
Snapdragon S4 8960 processor. So segregation of its QTL segment
will help the company to avoid any legal issues with the open
source developer. Moreover, the authority to grant license will lie
solely with the parent company, hence providing full security to
its patent licenses.
Currently, Qualcomm has a Zacks #3
Rank, implying a short-term Hold rating on the stock.
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