June 28, 2012 / 5:27 PM / 6 years ago

UPDATE 3-Qualcomm restructures to help protect patents

* New subsidiary to house chips, R&D
    * Qualcomm to keep most patents separate from license
    * Qualcomm shares fall 1.8 percent

    June 28 (Reuters) - Cellphone chip supplier Qualcomm Inc
 is changing its internal structure to protect its
technology licensing business by creating a new subsidiary that
will work on open source wireless developments.
    The biggest developer of cellphone chips also derives a huge
amount of its revenue from selling licenses for use of its vast
portfolio of technology patents to companies such as cellphone
makers whether or not they use Qualcomm chips.
    The restructuring comes at a time when the wireless industry
is beset with litigation related to technology patents. 
    Under the new structure, Qualcomm Inc as the parent company,
will include its technology licensing division and corporate
functions as well as most of its patent portfolio. Qualcomm
Technologies Inc (QTI), the new subsidiary, will include its
research and development arm and its wireless chip business.
    Qualcomm said it needed to make the change to protect its
patent licensing business because its new subsidiary QTI plans
to increase its work with open source software. Open source
projects typically involve the sharing of technology with the
broader development community. 
    While the parent company will keep most of Qualcomm's
patents, QTI will hold some patents that are specifically
developed to provide open source software contributions.
    Bernstein analyst Stacy Rasgon said the move should not
worry shareholders as it would not change Qualcomm's finances.
He saw it as a forward looking effort to protect the patent
business which generates a much higher profit margin than
Qualcomm's chip business. 
    "If they do see a risk that their patents could leak out as
part of their open source efforts obviously this is good,"
Rasgon said. 
    Under the new structure, QTI will have no rights to grant
licenses held by the parent company, Qualcomm said.
    Qualcomm said the restructuring was not aimed at spinning
out either its chip business or its licensing business and nor
was it in response to any third party actions.
    The company said the restructuring, which will be completed
during the first fiscal quarter of 2013, will not change the way
it reports its financial results. 
    Qualcomm shares were down $1.01 or 1.83 percent at $53.90 in
afternoon trade on Nasdaq.
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