Why Ericsson and Samsung quarrel
Ericsson is suing Samsung Electronics. Here's why (but the Ericsson stock tumbles on the stock market)
Ericsson is suing Samsung Electronics Co. Ltd. in the United States.
According to the Swedish telecommunications equipment manufacturer, the South Korean telecommunications giant has not followed a licensing agreement between the two companies.
But the legal dispute causes Ericsson's stock to plummet as it could affect the company's earnings. Its shares were down 8.2% after the start of trading in Stockholm, the biggest collapse of the company since March.
This morning, the Stockholm-based company announced that late royalty payments and potential litigation costs could impact Ericsson's operating income from SEK 1 billion to 1.5 billion per quarter starting in the first quarter of 2021.
All the details.
ERICSSON DRAG SAMSUNG TO COURT
Ericsson filed a U.S. lawsuit against Samsung in a dispute over royalty payments and patent licenses. The case will address alleged breaches of certain obligations by Samsung. The Swedish company said it "seeks a court ruling that Ericsson has honored its commitments."
The lawsuit will be reviewed by the United States District Court for the Eastern District of Texas.
BUT FALLS IN THE BAG
But investors aren't taking the news well. Ericsson shares fell 8.2% after trading began in Stockholm, the company's biggest crash since March.
LATE PAYMENT OF ROYALTIES
As many of the company's licensing deals expire next year, Ericsson says it faces the risk of delaying royalty payments as the deals are renegotiated.
OPERATING INCOME DAMAGED
Late royalty payments and potential legal fees could reduce Ericsson's operating income by SEK 1-1.5 billion ($ 118- 177 million) per quarter starting in the first quarter of 2021, the company said. society.
“A deferral of almost half of quarterly revenues on intellectual property rights corresponds to about 20-25% of the quarterly EBIT” analysts point out.
Any interruption of payments could be recovered once the dispute is resolved.
Royalties from its patent portfolio are expected to account for around one-third of Ericsson's SEK 29 billion in operating profit forecast in 2021, and this lawsuit could cut earnings by about 20% per quarter, Liberum analyst said. Janardan Menon.
THE TRANSITION FROM 4G TO 5G ALSO HAPPENS
The Swedish company also added that a shift in sales from 4G phones to 5G would also impact royalty payments.
HERE WE ARE AGAIN WITH LICENSES BETWEEN ERICSSON AND SAMSUNG
It is not the first time that Ericsson has dragged the South Korean giant to court. The latest dispute between the two companies dates back to 2012 when Ericsson took legal action against Samsung for alleged patent infringements.
Samsung signed a licensing agreement with Ericsson in 2001 covering the phone and network patents, renewed this agreement in 2007 and again in 2014 after a years-long legal battle.
It took two years to resolve, with Samsung paying the Swedish company $ 650 million along with years of royalties to end the legal battle.
THIS IS NOT THE FIRST TIME FOR THE SOUTHOREAN COLOSSUS
The South Korean giant is not surprised.
“Once we have received your complaint, we will review it and determine an appropriate response,” said a Samsung spokesperson.
Lawsuits over royalty payments are common in the tech industry. As Bloomberg recalls, Samsung has also been involved in lawsuits with Qualcomm and Apple over patents and royalty payments.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/perche-ericsson-e-samsung-bisticciano/ on Fri, 11 Dec 2020 10:58:51 +0000.