Some Phones With Qualcomm Chips Banned

The Associated Press
Friday, June 8, 2007; 12:53 AM

WASHINGTON -- A federal agency's decision to ban U.S. imports of new cell phones made with Qualcomm semiconductors could slow the introduction of new handsets and lead to higher prices for cell phone users.

The U.S. International Trade Commission said Thursday that it was banning the phones because the Qualcomm chips violate a patent held by Broadcom Corp.

The import ban would not apply to mobile phone models that are already being imported, just to future models. But because mobile phone models are updated rapidly, the exception for current models could last only a limited time, said Rebecca Arbogast, an analyst at investment bank Stifel, Nicolaus & Co.

"This is unwelcome news to Qualcomm and its wireless carrier customers," she said.

Mark McKechnie, an analyst at American Technology Research, said Qualcomm will have to scramble for technology that does not infringe on Broadcom's patents. The decision could potentially slow the introduction of new models, including Motorola Inc.'s Razr 2 phone, to be introduced in Asia in July and elsewhere later this year, he said.

Cell phone users could pay more as companies pass along the costs of switching to the new technology, analysts said.

The ruling also is a blow to service providers such as Verizon Wireless, Sprint Nextel Corp. and AT&T Inc., which sell phones that rely on Qualcomm chips to access their high-speed data networks. Eighty percent of the phones sold by Verizon use San Diego-based Qualcomm Inc.'s technology.

Paul Jacobs, Qualcomm's chief executive, said the decision could prevent imports of tens of millions of mobile phones. The company will immediately ask a federal court to prevent the ban from taking effect and ask President Bush to veto the order.

"We believe the commission has overstepped its statutory boundaries and has not afforded due process to manufacturers and operators," Jacobs told analysts on a conference call. "If (the ruling) stands, it will have a negative impact on consumers."

Verizon Wireless said it will also ask a federal court to block the order and urge a White House veto.

"This is a bad order for the industry, and it's going to freeze innovation," company spokeswoman Nancy Stark said. "We were never accused of infringing on anything yet we're being punished."

AT&T said it was studying the ruling and considering its options. Sprint Nextel declined to say if the company would join Verizon's appeal.

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