Semiconductor and telecommunications equipment manufacturer Qualcomm said on Wednesday it will take home a one-time payment of between $4.5 billion to $4.7 billion (£3.45bn to £3.6bn) from its settlement with tech giant Apple over the next quarter, the New York Times reported.
Last month, Qualcomm and Apple put to bed a massive, long-running patent and antitrust case that started when Apple sued the other company for alleged unfair patent licensing practices for $1 billion (£765m) and escalated when Qualcomm filed a countersuit for $7 billion (£5.4bn). Qualcomm came out the apparent victor, scoring a six-year licensing deal and a chip supply agreement as well as the massive one-off payment (though it also ended up shut out of supplying chips for a line of iPhones).
That multibillion dollar payment is a big deal for Qualcomm: the company estimated in its quarterly earnings report that it expects to take in a total of $4.7 billion to $5.5 billion (£3.6bn to £4.2bn) in regular revenue, before the payment is factored in, during the upcoming quarter. However, the company also said its legal war chest isn’t necessarily an immediate game changer, even if the deal positions it to be Apple’s sole 5G modem supplier in the wake of Intel’s withdrawal from the market. The Times noted that Qualcomm’s Q3 2019 forecasts, which fell on the slightly lower side of analyst expectations of $5.29 billion, “suggested that Apple’s licensing fees will not substantially increase revenue as Apple catches up on royalties it didn’t pay while the two companies were feuding.”
Per the Wall Street Journal, Qualcomm is projecting a lull until 5G rollout reaches a steady pace:
Qualcomm estimated it would ship between 150 million and 170 million of [its cellular phone system-on-chips] in its third quarter, a decrease of as much as 25% compared with the same period last year. Analysts had expected almost 180 million chip shipments for the period, according to a FactSet survey.
During their call with analysts, Qualcomm executives blamed the dimmer outlook on economic weakness in China and a slower-than-expected rollout of next-generation wireless technology. They said, however, that the introduction of 5G networks was now proceeding quickly after a pause, and that would boost Qualcomm’s overall business in the future.
The Journal added the resolution of the Apple-Qualcomm battle does mean that Qualcomm faces less threat of courts outlawing its business model – “combining an arm that produces and sells advanced chips for mobile phones with one that makes money by selling access to its intellectual property” – but does still leave it open to an ongoing Federal Trade Commission lawsuit over whether its habit of refusing to supply chips to customers who do not have patent licenses gives it undue power to control deals. The Journal wrote that “A decision there could come at any moment.” [New York Times/Wall Street Journal]
Featured image: Richard Drew (AP)