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Qualcomm Earnings Report Gives Glimpse Of Apple Settlement

Qualcomm Earnings Report Gives Glimpse Of Apple Settlement
The impact on the bottom line of US based chip maker Qualcomm because of its legal fight with iPhone maker Apple Inc over patent rights was made clear for investors. It also included the undisclosed multibillion dollar payment from the case settlement with Apple as one time payment and future patent fees.
Despite a drop in the prices, most of the gains that it had made in the past few weeks were retained which shows that Qualcomm investors were relieved that the company would be again supply its chips to Apple. However, the forecast made by Qualcomm indicates that the revenues that would be generated from re-continuation of supply of chips to Apple would not be enough to offset the drop in revenues because of demand drop in the overall smartphone market.
In the fiscal third quarter, the money from the settlement of the case with Apple would add a a one-time payment of between $4.5 billion and $4.7 billion. Those payments would be made by Apple against due royalties which were not paid by the iPhone maker during the period of the legal battle with the chip maker.
According to IBES data from Refinitiv, forecast of estimated $4.7 billion to $5.5 billion in revenue was made by Qualcomm excluding the payment from Apple which is lower than the analysts’ expectations of $5.29 billion in revenues. Slowdown in demand for smartphones in China was the cause of the shortfall. According to Qualcomm, the weakening of demand in the Chinese market is because of consumers there are postponing purchasing of new smartphones till the roll out of the new 5G networks later this year.
“We’re looking forward to having a 5G Christmas as the year ends,” Cristiano Amon, Qualcomm’s chip chief, said on a conference call with investors.
Qualcomm has said that $2 per share in additional earnings would be generated by the money that would be obtained from the Apple settlement – including payments for a six-year patent license and an agreement for chip supply. While the details of the settlement with Apple were never disclosed, but analysts estimate the deal would help Qualcomm to regain its dominant position in the chip industry similar to what it enjoyed in the early 2010s.
The third quarter estimate for revenue for its licensing business was put between $1.23 billion and $1.33 billion, announced Qualcomm, which was over the average estimate of analysts of $1.22 billion.
While the settlement with Apple was along expected lines, the outlook for revenues was not up to the mark, said Stacy Rasgon, an analyst with Bernstein. “That tells me that either Apple isn’t giving them all that much, or it says the core market is horrendous, or maybe a little bit of both,” Rasgon said.
The Apple deal was however welcomed by shareholders.
“I’m just pleased to have Apple back in the fold,” said Hal Eddins, chief economist at Capital Investment Counsel, which holds both Apple and Qualcomm shares. “I think they both came out well in the deal and am very impressed (Apple Chief Executive Tim) Cook agreed to it.”

Christopher J. Mitchell

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