For quite some time now, pessimism has been looming large over Qualcomm Inc.’s QCOM licensing business in China.
However, after an extensive tussle with regulators and domestic smartphone companies, things have been looking up for Qualcomm in China. The chip maker has been frequently entering patent licensing deals in the country.
Recently, Qualcomm announced the signing of Chinese Patent License Agreement (CPLA) with two Chinese smartphone makers – Beijing Tianyu Communication Equipment Co. and Haier Group.
The announcement of the deals has aroused fresh interest in the stock. Notably, the company’s shares gained nearly 3% in yesterday’s trading session, dispelling investors’ fears over Chinese vendors overlooking Qualcomm’s patent licensing.
Per the agreement, Qualcomm has granted Tianyu and Haier, royalty-based licenses to develop, manufacture and sell devices that are integrated with the former’s 3G and 4G technology.
We note that only recently Qualcomm had announced the signing of a similar deal with QiKu Internet Network Scientific (Shenzhen) Co., Ltd, a joint venture between Qihoo 360 Technology Co. Ltd. QIHU and Coolpad Group Ltd. Also, earlier this month, Qualcomm signed a 3G/4G patent-licensing deal with Chinese smartphone maker – Xiaomi Inc.
Notably, the royalties that all these companies will be paying to Qualcomm for those patents are consistent with the rectification plan submitted by Qualcomm to China's National Reform and Development Commission (NRDC). The financial details of all the deals have been, however, kept under wraps.
With these deals, Qualcomm intends to extend its pledge to constantly aid in the growth of Chinese companies and develop wireless networks, devices and applications. Notably, Qualcomm has by now inked agreements with majority of the top phone makers in China.
However, regulatory proceedings against Qualcomm are still on the rise with the handset chip maker facing antitrust cases in various countries. Thus, settlement of these regulatory issues is a major concern for Qualcomm at this juncture because if found guilty, the penalty imposed may hurt the company’s profits considerably.
Meanwhile, Qualcomm recently announced its decision to maintain its corporate structure and not split its chip making and technology licensing businesses.
Notably, Qualcomm is the largest global baseband chipset developer for mobile handsets. The company’s chipsets are used in Apple Inc.’s AAPL iPhone as well as Alphabet Inc. GOOGL-developed Android smartphones.
We believe these new patent license agreements will lessen the chip maker’s struggles in China and take it a step closer to solving issues pertaining to its most profitable licensing patent business. Further, the deal should boost Qualcomm’s top line by bringing in additional royalties and also solidify its foothold in the Chinese market.
Qualcomm currently carries a Zacks Rank #4 (Sell).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment