The Story Behind Nokia and Qualcomm

As we reported last week, Nokia, the world’s largest mobile handset vendor, and Qualcomm, the largest chipset manufacturer for cell phones, suddenly agreed to settle their legal battles over intellectual property and royalties, BusinessWeek writes—just as a pivotal court case in Wilmington, Delaware was about to get started. The two companies also set up a 15-year licensing deal.

The central issue was what Nokia and other vendors should pay to license Qualcomm’s patents for third-generation (3G) mobile technology. Nokia wanted to pay less than 3%, while Qualcomm was asking 4.5%—which BusinessWeek notes is dangerously close to the 5% operating profit margin that many cell phone vendors are up against.

The deal can have wide-ranging implications, not the least of which is more Nokia phones in the U.S. (Remember, they’re fourth in sales here but number one globally.) “Psychologically, U.S. carriers were very worried about dealing with Nokia while the patent dispute was raging, and it was almost impossible for Nokia to deliver mobile phones for CDMA networks [Verizon and Sprint, in the U.S.] without working with Qualcomm,” said Ben Wood, director of CCS Insight, in the report. “The agreement will help Nokia’s efforts in North America, which is their Achilles’ heel right now.” Nokia also has plenty of mobile media efforts in play, all of which would gain additional traction with the arrival of Verizon and Sprint phones.

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