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Broadcom & Volkswagen to Reportedly Settle Patent Dispute

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Broadcom (AVGO - Free Report) and Germany-based automaker Volkswagen (VLKAY - Free Report) have reportedly entered into an agreement to settle patent lawsuit outside of court, per Reuters, citing a source familiar with the matter.

In fact, according to the source, a court trial slated for Friday has been called off. However, both the companies refrained from making any official statements.

Broadcom had reportedly claimed €1 billion (approximately $1.1 billion) earlier this month from Volkswagen for the unauthorized use of its 18 patents. The company had also threatened the automaker to judicially demand prohibition on production of notable Volkswagen models, including select models of Porsche and Audi, per the reports.

The automaker is alleged to have infringed upon patents concerning Broadcom’s semiconductors, Volkswagen leverages for its entertainment and navigation system in select car models.

We note that this is not the first time that Broadcom charged an automaker over patent infringement. In May 2018, the semiconductor company alleged Japan-based Toyota Motor (TM - Free Report) with infringement charges of six infotainment system patents between 2005 and 2014.

Further, in 2009, Qualcomm (QCOM - Free Report) inked a deal to pay $891 million to Broadcom to settle long time patent dispute.

Will R&D Initiatives Help Broadcom Revive IP Revenues?

Broadcom’s research and development (R&D) initiatives set it apart from its peers. In fiscal 2017, the company incurred $3.29 billion on R&D (18.7% of total revenues) which increased 23% year over year in a bid to reap the high growth and high-value opportunities.

As of Oct 29, 2017, Broadcom had 24,250 patents, with expiration dates ranging from 2018 to 2036. Further, aggressive acquisition policy favors Broadcom with patent wins.

Notably, in the third-quarter of fiscal 2018, Broadcom reported Industrial & other (5% of total revenues) of $225 million, declining 5% year over year. The decline can primarily be attributed to decrease in Intellectual Property (IP) licensing revenues.

However, excluding IP licensing revenues, Industrial business continued to grow, highlighting year-over-year increase of 10%.

Broadcom Inc. Revenue (TTM)

 

Broadcom Inc. Revenue (TTM) | Broadcom Inc. Quote

Broadcom currently carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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