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Qualcomm's Patent Deal With Xiaomi Gives Each Something It Badly Needs

The deal helps ease Qualcomm's China licensing woes and could pave the way for Xiaomi's global ambitions.

Ina Fried / Re/code

In a move that could help both companies fuel broader ambitions, Qualcomm and Xiaomi announced a patent licensing agreement on Wednesday that will see the Chinese phone maker pay royalties for its 3G and 4G phones.

For Qualcomm, the deal means additional revenue for its licensing business and shows that the company is making slow but steady progress in its effort to get Chinese phone makers to pay patent royalties in the wake of an antitrust settlement there.

Xiaomi, meanwhile, has been eyeing expansion beyond emerging markets; doing so is likely to mean patent licensing deals with some of the key players. It remains in a dispute with Ericsson and could face actions from Apple or others if it decided to move into markets with stronger intellectual property laws. Xiaomi has said it wants to sell devices in the U.S. eventually, though it has yet to give a time frame.

“Qualcomm is committed to the success of its partners in China as they continue to grow their businesses and we are pleased to reach this new agreement with Xiaomi,” Qualcomm President Derek Aberle said in a statement.

The company’s stock has taken a beating this year as Qualcomm has lowered its outlook several times. In addition to the China issues, the company’s chip business suffered a huge loss as Samsung used homegrown chips to power this year’s flagship models. According to sources, Qualcomm will get some of Samsung’s Galaxy S7 business, in part thanks to its move to use Samsung’s factories to manufacture its Snapdragon 820 processor.

Shares of Qualcomm were up on Wednesday after the Xiaomi deal was announced, changing hands recently at $52.90, up $3.60, or more than 7 percent.

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