Qualcomm says Broadcom ruling to hurt short-term

By Sinead Carew and Franklin Paul

NEW YORK (Reuters) - Wireless chip supplier Qualcomm Inc (QCOM.O) said on Wednesday it would be hurt in the short term by a court injunction on the sale of chips infringing rival Broadcom Corp's (BRCM.O) patents, but it promised to have alternative products in phones before the end of the quarter.

Broadcom shares rose as much as 5 percent after the news and Qualcomm shares fell 1.7 percent, but the trading reflected by some investor relief that Qualcomm appeared to have a technology workaround.

A federal judge in California on Monday barred Qualcomm from selling products infringing three Broadcom patents in the United States, but said it could sell some chips using the patents through the end of January 2009 if it paid royalties.

The judge also issued an immediate injunction on Qualcomm chips based on WCDMA, a high-speed wireless technology, that were found to infringe Broadcom's video encoding patent.

Qualcomm, which is also embroiled in legal battles with leading phone maker Nokia (NOK1V.HE), said it was looking at legal options such as an appeal and promised to have new WCDMA chips in U.S. phones before the end of March.

Analysts said the short-term impact of the ruling did not appear to be severe.

"The injunction is probably a bit wider than anticipated, but that is offset by faster availability of workaround chips than expected," said Cowen & Co analyst Matthew Hoffman.

Hoffman estimates that about 30 percent of Qualcomm's total revenue is generated in the United States, with only a small portion of U.S. revenue coming from WCDMA, a wireless high-speed Internet technology used by No. 1 U.S. mobile service AT&T Inc (T.N).

Tim Long of Banc of America said in a research note that he expects a nominal earnings per share impact on Qualcomm.

Analysts have forecast Qualcomm earnings of $2.11 per share, before items, on revenue of $9.84 billion for its fiscal year ending in September, according to an average compiled by Reuters Estimates.

Qualcomm said it has taken immediate actions to comply with the ban and plans to disclose any financial impact when it reports quarterly earnings on January 23.

"While Qualcomm will attempt to obtain further relief and clarity from the court on certain aspects of its order, the inability to obtain such relief will have an immediate short-term impact as handset customers transition to new designs for WCDMA products," Chief Executive Paul Jacobs said on an analyst call.

SPRINT SEES NO QCHAT DELAYS

Qualcomm said it is still examining the impact of the ruling for U.S. customers, which also include Sprint Nextel Corp (S.N) and Verizon Wireless, a venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L).

Qualcomm said newer chips that do not infringe Broadcom patents are already available to device manufacturers for the United States and are expected to be commercially available in handsets by the end of the quarter.