Qualcomm Secured Settlement Compensation Worth Over $4.5 Billion from Apple
Qualcomm, renowned for manufacturing semiconductors and telecom equipment, announced on Wednesday that they'll pocket a one-time sum of between $4.5 billion and $4.7 billion from their settlement with tech titan Apple, according to the New York Times.
Putting an end to their prolonged patent and antitrust dispute, Qualcomm and Apple finally reconciled in March 2019. The feud started when Apple filed a lawsuit accusing Qualcomm of unjust patent licensing practices, totaling $1 billion. Qualcomm retaliated with a counterclaim for an astronomical $7 billion. Despite the legal skirmish, Qualcomm emerged victorious, securing a six-year global patent licensing deal, a multi-year chip supply agreement, and the substantial one-off payment. However, they also missed out on supplying chips for a specific iPhone line during the legal battle.
The colossal payment is a major boost for Qualcomm. In their quarterly earnings report, they projected total regular revenue of $4.7 billion to $5.5 billion for the upcoming quarter, without considering this payment. Yet, the company clarified that this payment wouldn't immediately transform their financial situation, even if Qualcomm becomes Apple's sole 5G modem supplier post Intel's market withdrawal. According to the New York Times, Qualcomm's Q3 2019 forecast, falling just below analyst predictions of $5.29 billion, indicates that Apple's licensing fees won't drastically increase revenues as Apple catches up on unpaid royalties.
The Wall Street Journal reports that Qualcomm expects a lull in shipments until the steady implementation of 5G technology. Qualcomm has estimated between 150 million and 170 million shipments of their cellular phone systems-on-chips for their third quarter, which represents a decrease of up to 25% compared to the previous year. Analysts had anticipated almost 180 million chip shipments for the period, revealing a slight discrepancy, which Qualcomm executive attributed to China's economic slump and the slower-than-expected 5G rollout.
The Journal also highlighted that while the Apple-Qualcomm battle resolution lessens the threat of courts obliterating Qualcomm's business model, it nonetheless leaves them vulnerable to an ongoing Federal Trade Commission lawsuit concerning their practice of withholding chips from non-licensed customers, potentially influencing deals. The Journal hints that a verdict in this case may drop anytime soon.
[1] Zacks Investment Research, 2019, Qualcomm: Strong Q4 Earnings and Q1 Guidance Raise Earnings Estimates, www.zacks.com/article/qualcomm-q4-earnings-q1-guidance-raise-earnings-estimates[4] FierceWireless, 2019, Qualcomm and Apple cut patent lawsuit deal, settle for $4.7B, www.fiercewireless.com/telecom/qualcomm-apple-cut-patent-lawsuit-deal-settle-for-47b
- Given the multibillion-dollar settlement with tech giant Apple, Qualcomm's future profits are expected to significantly increase, with their projected quarterly revenue now reaching between $4.7 billion and $5.5 billion.
- The addition of this substantial payout to their coffers, stemming from the patent dispute resolution, might not necessarily translate into an immediate financial transformation for Qualcomm, even if they become Apple's sole 5G modem supplier.
- Although the lawsuit settlement between Qualcomm and Apple reduces the risk of court-imposed disruptions to Qualcomm's business model, the company remains under scrutiny in a separate lawsuit filed by the Federal Trade Commission, regarding their practices of withholding chips from non-licensed customers.
- As technology advances and 5G becomes more prevalent, tech companies like Qualcomm are constantly upgrading their offerings, with the company estimating between 150 million and 170 million shipments of cellular phone systems-on-chips for their third quarter, indicating a potential decrease in shipments compared to the previous year.
