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For instance, according to Michelle Leder at Footnoted.org, UnitedHealth Group (NYSE: UNH),
which has largely put an options-backdating scandal behind it, is still
paying for the affair. Since 2006, UnitedHealth has spent close to $50
million on legal fees, with almost $17 million spent in 2008. That's a
lot of money, and worth noting, but let's put it in perspective: The health-care services company raked in almost $3 billion in profits in the past year.
Legal fees can be somewhat more consequential for other companies, though. For example, Qualcomm (Nasdaq: QCOM) and Broadcom (Nasdaq: BRCM) recently buried a legal hatchet,
with Qualcomm agreeing to pay an $891 million settlement. Qualcomm had
reportedly paid up to $100 million annually for several years to defend
itself against both a patent dispute from Broadcom as well as an
antitrust kerfuffle that also brought several competitors, including Nokia (NYSE: NOK) and Texas Instruments (NYSE: TXN), into the mix.
Even those more extensive legal fees didn't look like they'd sink
Qualcomm, but they were certainly pressuring the company. Of perhaps
greatest interest to Qualcomm investors is an agreement with Broadcom
that they won't sue each other in the future. That erases much
uncertainty surrounding the company, and it means Qualcomm can focus
more on growing its business and less on defending it.
A more stark effect can be seen at RealNetworks (Nasdaq: RNWK),
which has reportedly spent some $6 million in legal fees defending its
RealDVD software since 2008. That money hasn't been easy for
RealNetworks to part with, given that the company has suffered net
losses for four consecutive quarters now.
What to do
So, as you look for
investment candidates, keep an eye out for legal fees. Be ready to see
patent fights, antitrust claims, class action suits, and a host of
other issues being litigated in a costly manner. Then make your
decision accordingly, with your eyes open.
More about companies and their legal troubles:
- Read about the coal company that's spending too much time in court.
- Can you profit from legal battles?
- Find out what Sun admitted to.
© 2009 UCLICK L.L.C.
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