Nokia patent deal with Qualcomm boosts both stocks

HELSINKI (Reuters) - Nokia (NOK1V.HE), the world's top cellphone maker, has ended three years of legal battles with wireless chip developer Qualcomm (QCOM.O) and signed a patent agreement that boosted both companies' shares.

Under the 15-year agreement, Finland's Nokia will make an upfront payment to U.S. firm Qualcomm and pay subsequent royalties, but it said payments per phone would fall.

Nokia's net royalty rates for access to Qualcomm's patents will drop under the agreement, Nokia's Chief Financial Officer Rick Simonson told Reuters on Thursday.

On average, Qualcomm charges phone makers close to 5 percent of the price of a handset, though there are small variations between deals.

Shares in Nokia were 2.1 percent higher in Helsinki at 17.31 euros by 1115 GMT, outperforming a flat DJ Stoxx European technology index .SX8P, while Qualcomm shares were indicated to open up more than 20 percent at $54.19 later in the U.S.

"Nokia negotiated a very good deal, and the others will demand that too," said analyst Helena Nordman-Knutson, from Ohman Fondkommission in Stockholm.

"If there is an agreement where royalty per unit goes down, the others won't agree to stay on their old levels. Potentially it's good for everyone with these kinds of big deals," she said.

Ericsson (ERICb.ST), Broadcom (BRCM.O), NEC (6723.T), Panasonic (6752.T) and Texas Instruments (TXN.N) have all filed complaints with the European Union alleging anti-competitive conduct by Qualcomm, including excessive royalty rates.

The deal with Nokia, which ends all legal cases between the two firms, covers the world's most widely used mobile phone technologies and some key emerging ones.

The companies did not reveal specific financial details.

UNCERTAINTIES REMOVED

"I think it is good for Nokia. There have been a lot of uncertainties around this issue, and all these are now removed," said Martti Larjo, an analyst with Nordea.

"It has wide-ranging implications for both companies, but we expect Nokia will be hoping to capitalize on it in the key North American market, where it has struggled to make headway with leading CDMA carriers," said Ben Wood, research director at CCS Insight.

Nokia's CFO Simonson said Nokia had made ample provisions for settling the row, but declined to name the amount.

"They were more than enough," he said in an interview, but did not want to quantify the impact the settlement could have on Nokia's third-quarter earnings.

"This gives me incremental benefit and this is over 15 years. People should not be looking at the third quarter impact on a 15 year agreement," he said.

(Additional reporting by Agnieszka Flak in Helsinki and Sven Nordenstam in Stockholm, editing by Will Waterman)