QUALCOMM, Inc. (NASDAQ:QCOM) has entered into an agreement with Xiaomi and this could spell an end to helping the company resolves the licensing issues in China. Under the agreement, Qualcomm would give Xiaomi a royalty of 5.17 per cent on sale of its 3G and 4G cellular network devices.
Analysts report that in the LTE cellular technology, Qualcomm had 170 patents in FY14 and the royalties to the tune of $8.2 billion were bagged by the company in 2015 while in 2014, they earned $7.9 billion in royalty.
Jana Partners LLC had acquired $2 billion worth shares of the company this year and asked them to help them in meeting the licensing compliances through their patents. While two-third of Qualcomm’s revenue is generated from the smartphone and tablet processors, the same amount is earned through the licensing patents of the company.
Revenues of Company
The revenue after excluded the licensing division was $17 billion last year which saw a dip from $18.6 billion in the year before that. In the year-over-year growth, the profits saw a dip of over $3 billion. In the last quarter earnings results of Qualcomm, the company focused majorly on China. Qualcomm’s patent licensing demands have gone unheard in China which is among the world’s largest smartphone markets.
Chinese Cooperation Minimal
The Chinese government has also not been very friendly to Qualcomm and the company has had some disputes with the authorities in that country. As a result, they had to pay $975 million as fine and make some alterations in the patents for the Chinese market.
According to a company official, they were not happy about the fine but it was paid anyhow. The current agreement would help the company in using its patents when working with Chinese smartphone manufacturers.
The Chinese operations have not been profit yielding for the company so far and in the last month it was announced that QUALCOMM, Inc. (NASDAQ:QCOM) had secured around 60 patents in the foreign country. With a deal with Xiaom, the company will benefit largely in China as the Chinese device maker has a target of shipping 100 million smartphones in 2015 fiscal.
