Many of Qualcomm’s (QCOM) supporters assume that it will settle its licensing dispute with its largest customer Nokia (NOK). The current contract between the two companies comes up for renewal in April. But, AG Edwards see a lot of risk in the possibility that the dispute between the two companies will go on. According to Barron’s “it may take some time” for the company to work out a royalty agreement with Nokia.
And that may only be part of the problem. A number of handset companies may not want to pay license fees to Qualcomm at all. As the firms that build inexpensive wireless devices for emerging countries look at their options for new handsets "it may want those phones to operate on GSM-based technologies, not Qualcomm’s CDMA," according to Barron’s.
And, there is a third hurdle for Qualcomm. Rival Broadcom (BRCM) is challenging certain Qualcomm intellectual property rights, and if it prevails QCOM could face another cut in its current revenue stream.
No wonder AG Edwards dropped the stock to a "hold".
Douglas A. McIntyre can be reached at email@example.com. He does not own securities in companies that he writes about.