No matter how good Qualcomm (NASDAQ: QCOM)'s earnings have been over the last two years, its stock has been capped to some extent by its long legal battle with its largest customer, Nokia (NYSE: NOK). The dispute is over now, news which is probably better for Qualcomm than Nokia. The legal threat hanging over the cell phone chip maker firm is gone.
According to The Wall Street Journal, "Under the settlement, Nokia will withdraw that complaint as well as other litigation. Besides getting licenses to Qualcomm patents, Nokia said it will assign ownership of a number of its patents to Qualcomm. The pact not only covers patents used in current cellphone networks but also emerging technologies that could succeed them -- including WiMax and LTE, which stands for long-term evolution."
The news sent Qualcomm's stock up over 18%.
Nokia had disputed the fees Qualcomm charged for its chips and the license fees for its technology. Qualcomm can now get substantial payments from its former nemesis. If Qualcomm had lost its battle, its long-term income could have been cut sharply. Nokia is getting access to patents, but it will still be making payments to the chip company.
The trouble has kept Qualcomm's shares from trading above the $52 level that they hit in mid-2006. Investors can expect that the ceiling on the stock will now be gone.
Douglas A. McIntyre is an editor at 247wallst.com.