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Why Qualcomm acquired 2,400 patents from HP

Jan 23, 2014

FORTUNE -- Qualcomm (qcom) announced on Thursday that it acquired some 2,400 patents (and pending patent applications) from Hewlett-Packard (hpq).

The deal was announced quietly -- the official statement was only 98 words in length -- and gives the former, the world's most valuable semiconductor company, a more formidable position in mobile intellectual property and the latter, a technology giant seeking a third act, a presumably sizable infusion of cash. (The purchase price was not publicly disclosed.)

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The portfolio includes patents from Palm, the fabled PDA company, as well as the iPAQ pocket PC project and Bitfone, the mobile device management company acquired by HP in 2006. About 1,400 patents and pending applications are from the U.S., and about 1,000 patents and pending applications are from other countries, mostly pertaining to core mobile operating system techniques.

Which is precisely why Qualcomm is interested. For all of its successes in the growing mobile device business, about two-thirds of the company's profits actually come from its wireless technology licensing business. Qualcomm collects royalties on nearly every modern smartphone sold on the market today. The addition of HP's patents strengthens that business even more, giving it additional income to reinvest in new businesses and keep ahead of rival Intel (intc).

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