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Qualcomm lowers Q3’17 profit guidance by $500Mn as Apple cuts off licensing royalties

The legal battle between Qualcomm and Apple is far from being over. Qualcomm, as detailed today via an official blog post, believes Apple is ‘improperly interfering’ with the chipmaker’s agreements with suppliers who share Apple as the common denominator. It has thus taken this moment to warn investors that this interference could lead to multi-million dollar cuts in profit and sales figures over the coming years.

For those unaware about the tussle between the two tech giants, Apple first lodged a billion lawsuit against the chipmaker for being charged unfairly for the patents they had nothing to do with. This was followed by unfair trade practice charges across the globe — specifically in China and South Korea. All this happened over the span of past three months.

Earlier this month, Qualcomm has also hit Apple back with a lawsuit seeking damages for wrongly accusing the chipmaker of unfair trade practices, harming its business and breaching their long-running contract. In the lawsuit filing, the company had already said that Apple was meddling in its relation with other partner suppliers and manufacturers — which is the interference caused today.

Talking about the same, Don Rosenberg, executive VP and general counsel of Qualcomm said:

Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees. These license agreements remain valid and enforceable.

Rosenberg further continues to mention that Apple has acknowledged that it owes license royalty payments to the chipmaker, still they’re continuing to focus on interfering with Qualcomm’s other contracts. As part of the same, Cupertino has now deemed their long-running contract, which applies to most iOS devices such as iPhones and iPads, between them as unacceptable.

Thus, the chipmaker has taken the aforementioned developments into account and updated its financial guidance for the coming quarter i.e Q3 2017. It has decided to be completely upfront about its situation and exclude royalty revenues it earned from Apple’s contract manufacturers.

The contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant.

Currently, the condition doesn’t seem to be looking positive — meaning it doesn’t expect any payments to come from them. Thus, it has lowered both its revenue guidance numbers by a massive $500 million. For the third fiscal quarter, Qualcomm is now expecting revenue in the range of $4.8 billion to $5.6 billion as compared to the previous $5.3 billion to $6.1 billion. The earnings per share has also been reduced to a range of $0.52-$0.62, as compared to the previous $0.67-$0.92 guidance. This means a year-on-year decline in sales/revenue is inevitable.

qualcomm

The Wall Street analysts had already warned that such a day would definitely come in the chipmaker’s lifecycle if it doesn’t settle the lawsuit with Apple. The investors, as expected, are reacting to this news pretty intensely as Qualcomm’s share price has been driven down by almost 3 percent. This doomsday warning could prove to be fatal for the largest mobile chipmaker in the future too. Talking about the attack on its integrity and business, Rosenberg has added,

Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple’s global attack on Qualcomm. We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.



This post first appeared on The Tech Portal, please read the originial post: here

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Qualcomm lowers Q3’17 profit guidance by $500Mn as Apple cuts off licensing royalties

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