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Qualcomm To Pay Broadcom $891 Million In Patent Litigation Settlement

Broadcom's bonanza could help it fulfill its unsolicited bid to take over Fibre Channel storage networking company Emulex.

Broadcom and Qualcomm have ended years of patent battles with Qualcomm agreeing to pay $891 million to Qualcomm over four years. Stockholders of both companies welcomed the settlement, driving up shares of both companies in early Monday trading.

"At a time when the wireless industry should be focused on moving forward, the agreement removes uncertainty for Qualcomm and its customers," Qualcomm chief executive Paul Jacobs said in a statement.

Echoing Jacobs' friendly statement, Scott McGregor, president and CEO of Broadcom, said: "We have set aside our differences while addressing the needs of our customers, our shareholders, and the industry."

The bonanza for Broadcom could help it in its unsolicited offer to take over Emulex for $764 million. Emulex has responded to the offer, stating the company's directors are reviewing the Broadcom offer.

Qualcomm also announced its second-quarter financial results Monday and said the settlement had negatively impacted its results. Jacobs said that demand for its 3G products and services continue to be strong in spite of the worldwide economic meltdown. "While this settlement with Broadcom will resolve all pending litigation between the parties, and while this settlement adversely impacted our second-quarter results, eliminating uncertainty, employee distraction, and cost related to protracted litigation is a positive for our stockholders, customers, partners, and the wireless industry."

Jacobs said the company believes its CDMA inventory has stabilized and there is some evidence that there's a replenishment of products for emerging markets under way. Qualcomm's revenue was $2.46 billion in the quarter -- down from $2.61 billion in the prior year's quarter.

Before the settlement, the two companies had engaged in a series of intellectual property lawsuits, with Broadcom winning most of them.

For Broadcom, the settlement will let it move more aggressively into cell phone componentry markets. If it's successful in acquiring Emulex, it will be able to increase its presence in data centers by offering Emulex's Fibre Channel products along with its Ethernet products.

InformationWeek Analytics has published an independent analysis of the challenges around enterprise storage. Download the report here (registration required).

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