Feature Article

July 02, 2012

Qualcomm Creates Subsidiary to Protect Technology Licensing Business

To protect its technology licensing business, cell phone semiconductor supplier, Qualcomm Inc. is reorganizing its internal structure. The semiconductor supplier is creating a new subsidiary that will work on open source wireless developments.

The report indicates that a big part of Qualcomm’s revenue comes from selling licenses that permit companies like cell phone makers to use its vast portfolio of technology patents. Sinead Carew and Supantha Mukherjee wrote that “the restructuring comes at a time when the wireless industry is beset with litigation related to technology patents.”

As per this report, the new structure creates a new subsidiary called Qualcomm Technologies Inc. (QTI), which includes its research and development arm and its wireless chip business. Under the new organization, parent company Qualcomm will include technology licensing division and corporate functions, as well as most of its patent portfolio.

According to Qualcomm, the company needed to make this change to protect its patent licensing business because the 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, added Carew and Mukherjee.

The parent company will keep most of Qualcomm's patents, while QTI will hold some patents that are specifically developed to provide open source software contributions.

Commenting on Qualcomm’s restructure, Bernstein analyst Stacy Rasgon said, “The move should not worry shareholders as it would not change Qualcomm's finances.”  The analyst sees it as a forward looking effort to protect the patent business, which generates a much higher profit margin than Qualcomm's chip business.

Under the new structure, QTI will have no rights to grant licenses held by the parent company, Qualcomm said.

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Edited by Brooke Neuman

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