By Amy Thomson and Susan Decker
Jan. 2 (Bloomberg) -- Qualcomm Inc., the second-biggest maker of mobile-phone chips, fell 2.4 percent in Nasdaq trading after a court barred it from selling semiconductors that infringe three Broadcom Corp. patents.
Qualcomm said today that it will appeal the decision and offer phone makers substitutes for some of the components. The San Diego-based company is reviewing the Dec. 31 ruling and will also request further clarification from the federal court in Santa Ana, California.
Broadcom has been challenging Qualcomm in federal and state courts for more than two years, seeking a bigger share of the market for Internet and multimedia mobile-phone chips. Qualcomm ranked second in sales of mobile chips last year, after Texas Instruments Inc.
``Other companies are going to try to use this court's order to gain some advantage,'' Qualcomm Chief Executive Officer Paul Jacobs said in a conference call. ``While there may be some near- term impact of the ruling, I think we can continue to execute extremely well.''
Qualcomm fell 96 cents to $38.39 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have climbed 2.5 percent in the past 12 months. Irvine, California-based Broadcom rose 18 cents to $26.32.
Alternative chips that help phones transfer high-resolution videos from one format to another will be available for customers such as Nokia Oyj, Samsung Electronics Co. and Motorola Inc. in the first quarter.
`Push-to-Talk'
Chips for ``push-to-talk'' technology and wireless Internet won't be barred until Jan. 31, 2009, for customers that began importing them before May 29, Qualcomm said. Sprint Nextel Corp. plans to use the walkie-talkie technology, know as QChat, so it can offer calls over two kinds of networks.
In addition to its U.S. litigation, Broadcom has joined with Nokia, the world's largest mobile-phone maker, in a European Commission complaint accusing Qualcomm of antitrust violations.
Broadcom, which is a ``very small'' player in the mobile- phone chip market, is counting on adoption of so-called third generation technology for growth, Peter Andrew, Broadcom's vice president of corporate communications, said in an interview.
``We believe that the competitive landscape has been seriously skewed by Qualcomm's business practices in the cell phone space, and we're not alone in that case,'' said David Rosmann, Broadcom's vice president of intellectual property litigation.
Nokia Dispute
Nokia and Qualcomm have their own legal differences in the U.S., Europe and Asia, all prompted by a failure to reach a new licensing agreement after one expired in April. Last month, a judge for the International Trade Commission said Nokia didn't infringe Qualcomm's patents for preventing dropped calls.
``While this Broadcom ruling is a loss to Qualcomm, Qualcomm stock is more materially impacted by their ongoing negotiations with Nokia,'' analyst John Lau of Jefferies & Co. in New York said in an interview.
Lau, who advises investors to buy Qualcomm stock and doesn't own any himself, said the royalties at issue in the Nokia dispute represent a larger portion of Qualcomm's revenue stream.
The case is Broadcom Corp. v. Qualcomm Inc., 05-467, U.S. District Court, Central District of California (Santa Ana).
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