Analyst: Motorola snubbing Qualcomm on 3G

Motorola Inc. has shifted its 3G chip business away from Qualcomm Inc. in favor of Texas Instruments Inc. and Freescale Inc., according to analyst Mark McKechnie.
“We believe Motorola’s decision was purely business,” McKechnie wrote in a note to investors yesterday. “Our checks reveal that Motorola found Qualcomm ‘hard to do business with.'”
McKechnie’s interpretation: Qualcomm’s chip prices or royalty rates are too high for Motorola, now hell-bent on cost management to maintain margins. The analyst downgraded his firm’s rating on Qualcomm from “buy” to “neutral” as a result.
“The absence of Motorola has removed a key driver of our positive rating,” with the backdrop of legal issues, McKechnie wrote.
The analyst said today that his conclusions are based on remarks by Motorola executives at last week’s analyst day presentation and subsequent contact with company sources.
“We are moving to a controlled architecture for silicon and a multi-sourced approach to our vendors,” said Jennifer Weyrauch, spokesperson for Motorola. “As for Qualcomm specifically, they are a strong CDMA supplier today and we will continue to use them on next-generation 3G devices opportunistically.”
“We have not been directly notified that anything in our sourcing relationship has changed and we also continue talks with Motorola on specific designs,” said a Qualcomm spokesperson.
Qualcomm’s stock appeared unaffected by the news, trading up 2% to around $37 per share.
McKechnie said he remains confident of Qualcomm’s long-term patent position, but will watch three upcoming events to better inform his view of Qualcomm’s “legal overhang,” which is dampening its stock value.
The first is the remedy phase of a district court trial in Santa Ana, Calif., where Qualcomm lost a decision to Broadcom Corp. over video-compression technology. The second is the outcome of Qualcomm’s request for a stay of the U.S. International Trade Commission’s ban on the importation of new handsets bearing the vendor’s chips, deemed by the ITC to violate a Broadcom patent. The third indicator for McKechnie is news from the American Arbitration Association’s involvement in the cross-licensing dispute between Qualcomm and Nokia Corp.
In other chip-related news:
–InterDigital Inc., announced it will receive a $20 million royalty payment soon, in addition to its third-quarter guidance of $55.5 million to $56.5 million. In its 8-K filing to the Securities and Exchange Commission, the IPR holder revealed a seven-year licensing agreement with Apple Inc. for the latter’s iPhone.
–MediaTek Inc. intends to acquire parts of Analog Devices Inc.’s wireless chip business for $350 million in cash. MediaTek is the largest Taiwan-based merchant chip supplier and its “immediate prize,” according to Forward Concept’s Will Strauss, is ADI’s TD-SCDMA chipset for the Chinese market, which should see 3G phone launches prior to next year’s Olympics.