from raging bull - declaration of war against Qualcomm,
Nokia, Siemens, Ericsson Agree on Wireless Royalties (Update3)
By Ville Heiskanen
Espoo, Finland, Nov. 6 (Bloomberg) -- Nokia Oyj, Siemens AG, Ericsson AB and NTT DoCoMo Inc. agreed to lower royalty payments for faster wireless technology to boost their chances of getting chosen by phone companies over Qualcomm Inc.
The companies aim to keep royalties related to wideband code- division multiple access technology below 5 percent of the price of the equipment. That's less than companies have to pay Qualcomm, which is the most significant single owner of patents for WCDMA and cdma2000, a rival technology it's promoting, analysts said.
Companies such as Nokia and Qualcomm are lobbying for phone companies to deploy their so-called third-generation technologies to offer mobile customers new services such as faster Internet connection and videoconferencing. The agreement promotes WCDMA because the lower patent payments make it cheaper for phone companies and application developers to adapt it.
``This is a declaration of war against Qualcomm,'' said Marko Maunula, an analyst at Conventum Securities.
The Qualcomm-backed cdma2000 standard is used in South Korea and the Americas. Nokia favors WCDMA, the standard rolled out across Europe. Both companies are lobbying for their technology to become the leading standard in, for example, China.
The agreement may force Qualcomm to lower the royalties it asks for its cdma2000 patents, analysts said. It may also force it to lower the royalties it asks for its WCDMA patents, as Nokia and its partners ``own such a vast set of patents that they may be able to operate without using Qualcomm's patents at all,'' Maunula said.
Most Profitable
Nokia and the other companies that reached the agreement own ``the clear majority of the essential'' WCDMA patents, Nokia said. Fujitsu Ltd., Matsushita Electric Industrial Co, Mitsubishi Electric, NEC Corp. and Sony Corp. have expressed their willingness to join the agreement, it said.
Royalties are Qualcomm's most profitable type of revenue, giving pretax profit margins of 88 percent in Qualcomm's third quarter ended June 30. Licensing and royalty revenue derived from Qualcomm's patents accounted for $198.9 million, or 28 percent, of non-investment revenue in the period, and the licensing division generated 59 percent of the company's pretax profit.
Nokia and its partners agreed to license their patents at rates that are proportional to the number of patents owned by each company. This seems to lead to royalty rates ``even under our earlier targeted cumulative 5 percent level,'' Nokia said. Analysts said the royalty rate Qualcomm asks is more than 5 percent.
``High royalty payments have been seen as a factor slowing down industry development,'' said Petri Arjama, an analyst at Handelsbanken. ``This is positive for WCDMA technology
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