Nokia to pay royalties to Qualcomm

Qualcomm rose 20 per cent in early US trading today. The 15-year agreement covers different mobile-phone standards and resolves all litigation including a Nokia complaint before the European Commission. Nokia will license all of Qualcomm's patents and won't use any of its patents against Qualcomm, the companies said yesterday in a joint statement.

Financial terms weren't disclosed and Qualcomm said it will provide an updated profit forecast today. Nokia will pay an upfront fee and ongoing royalties to Qualcomm. Investors have feared that Qualcomm's inability to reach a new agreement with Nokia after an earlier contract expired last year might hurt its licensing agreements with other phone companies.

The agreement "removes an overhang, an unknown," said Cody Acree, an analyst at Stifel Nicolaus Inc in Dallas who recommends keeping Qualcomm shares. "The question recently had been that the Qualcomm-Nokia arbitration could basically be unsettled and then drag on for years."

Nokia Chief Executive Officer Olli-Pekka Kallasvuo said in the statement that the financial effect on the Espoo, Finland- based company is "positive" and "within Nokia's original expectations".

18 Per cent Rise: Qualcomm rose 20 per cent to $53.91 in early US trading today. The stock had risen 72 cents, or 1.6 per cent, to $44.82 in Nasdaq Stock Market trading yesterday. The stock has gained 14 per cent this year, compared with a 14 per cent decline by the 18-member Philadelphia Semiconductor Index. Nokia rose 52 cents, or 3 per cent, to 17.48 at 2:52 pm in Helsinki trading.

Acree predicted that other companies will be scouring Qualcomm's earnings reports to see if Nokia was given a special discount on royalties. Competitors such as Motorola Inc, Samsung Electronics Co and LG Electronics Inc might want to negotiate better terms in their business dealings with Qualcomm based on what they discover about Nokia's payments, he said.

An exchange of know-how between the world's biggest mobile-phone maker and the world's biggest maker of the chips that run wireless phones might mean new devices with faster Internet access and better graphics, the companies said.

Access to patents: Qualcomm, based in San Diego, will be able to integrate some of Nokia's technology into its chipsets and will get control of some Nokia patents that are essential to certain phone standards.