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TriQuint Semiconductor Inc. (TQNT - Analyst Report) recently settled its three-year old dispute with rival Avago Technologies Limited (AVGO - Snapshot Report).

Both TriQuint and Avago have entered into patent cross licenses and agreed to dismiss all related litigation. Further, the companies have agreed to settle all claims between them. 

The dispute started in 2009 when TriQuint filed a complaint in the United States District Court for the District of Arizona against Avago. In the complaint, TriQuint claimed that the four U.S. patents owned by Avago are not infringed and are invalid. These charges were denied by Avago which further asserted that TriQuint products’ infringed upon ten of Avago's U.S. patents.

Both the companies did not disclose the specific terms of the settlement and the resulting licensing agreement.

Last month, management guided that the bottom line in the second quarter of 2012 will be severely hit due to weak revenue and higher litigation costs. Litigation expenses were $3.9 million in the first quarter. TriQuint expects to incur about $11 million in litigation expenses in the second quarter of 2012.

Meanwhile, net income plummeted 56% sequentially and 85% year over year to $1.9 million in the first quarter of 2012. EPS came in at $0.01 compared with ($0.06) in the year-ago quarter and $0.03 per share in the previous quarter. Excluding restructuring charges but including stock-based compensation, earnings per share came in at $0.01, in line with the Zacks Consensus Estimate.

The earnings estimates have shown a drastic decline in the last thirty days driven by the weak outlook provided by the company. All the four analysts covering the stock lowered their estimates leading to a significant fall in estimates.

The current Zacks Consensus Estimate for 2012 is ($0.16), down from $0.17, estimated thirty days ago.

We have a Neutral recommendation on TriQuint as of now. However, the stock has a Zacks #5 Rank, which translates into a short-term rating of Strong Sell, owing to the near-term pressure exerted by the weak outlook provided by management.

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