Qualcomm will pay to settle antitrust case

The San Diego Union-Tribune reports that "Qualcomm agreed yesterday to pay $1.8 million in civil penalties to settle charges that it violated an antitrust rule in its recent acquisition of Flarion Technologies." According to the Justice Department, "Qualcomm essentially “jumped the gun” by taking control of certain aspects of Flarion's operations during a pre-merger waiting period. The 1976 Hart-Scott-Rudino Act requires that companies wait a certain time before merging operations so government regulators can determine whether it would violate any antitrust laws."

The Flarion acquisition was announced in August 2005 with the waiting period ending December 23, 2005. However the article states that "as part of the deal Qualcomm immediately required that Flarion seek permission on such issues as customer proposals and licensing."

Of course, Qualcomm denied any wrong doing. Many were surprised the company was punished since "gun jumping has been fairly routine in mergers, especially with technology companies."

Michael King at Gartner said, "That kind of activity is a poorly kept secret in the technology field. The way Wall Street looks at this is (that) if companies haven't integrated their technology within six to eight months, they'll be punished."

Albert Lin at American Technology Research added, "almost all mergers in telecom have gun-jumped." He thought "the $1.8 million penalty wasn't significant to Qualcomm, which had $5.67 billion in revenue last year."

Lin said, “That's nothing as a percentage of the value of the deal and certainly nothing in terms of the value of the company."

According to the article, "Qualcomm completed its $600 million acquisition of Flarion in January. Flarion's specialty is known as OFDM, which stands for orthogonal frequency division multiplexing, and is designed to provide fast data speeds and large network capacity for such applications as wireless television service. Qualcomm also agreed to pay the New Jersey company an additional $205 million if key patents were granted."

Lin opined that "Qualcomm is betting on the future with its Flarion acquisition, saying that while its current technology is popular today, next-generation technology is enhanced by OFDM." He commented, "I think they felt they bought it for cheap."