02 November 2017
San Diego
Reporter: Barney Dixon

Qualcomm operating income plummets due to Apple dispute

Qualcomm’s Q4 2017 operating income has dropped by 82 percent compared to Q4 last year as a result of royalty and licensing disputes with Apple and other licensees.

The semiconductor company’s Q4 2017 operating income stood at just $300 million, compared to $1.8 billion in last year’s Q4.

The operating income for Q4 also dropped by 57 percent from its $800 million in the previous quarter.

In its 2017 fiscal results, Qualcomm revealed that its Q3 and Q4 2017 results were “negatively impacted as a result of actions taken by Apple and its contract manufacturers”.

Qualcomm also put the negative results down to another dispute with a licensee, who “underpaid royalties due in Q2 of fiscal 2017 and did not report or pay royalties due in Q3 and Q4”.

It added: “We expect these licensees will continue to take such actions in the future until the respective disputes are resolved.”

Apple sued Qualcomm in January 2017 for nearly $1 billion, claiming that Qualcomm had “unfairly insisted on charging royalties for technologies they have nothing to do with”.

Qualcomm has been since hit with a string of anti-trust lawsuits.

In October, Qualcomm was struck with a $775 million fine in Taiwan for abusing its position in the baseband chip market.

Qualcomm CEO Steve Mollenkopf suggested that the company would likely settle with Apple out of court and it could be a situation “where a solution just appears”.

Mollenkopf had said that Qualcomm’s uniqueness made it easy to attack, but defending itself was "worth doing" and “very valuable to our shareholders”.

However, Qualcomm’s Q4 2017 fiscal results showed a clear cliff-edge of shareholders, with diluted earning per share dropping to $0.11, compared to $1.07 in Q4 2016.

This represents a 90 percent drop year-to-year and an 81 percent drop from Q3 2017, where diluted earnings per share stood at $0.58.

In January, around the same time Apple sued Qualcomm, a Qualcomm shareholder filed a class-action lawsuit against the company, demanding compensation for a fall in share prices that he blamed on the way Qualcomm’s management has handled its anti-trust controversies.

Rasesh Shah claimed that Qualcomm lied to shareholders when it told them that, “unlike some other companies in the industry that hold back certain key technologies”, Qualcomm offers its “entire patent portfolio for use in cellular subscriber devices and cell infrastructure equipment”.

Shah said that these statements were “materially false”, “misleading” and “failed to disclose adverse facts pertaining to Qualcomm’s business, operational and financial results, which were known to [Qualcomm] or recklessly disregarded by them”.

According to law firm, Bernstein Litowitz Berger & Grossmann, which serves as lead counsel for the lawsuit, “Qualcomm’s clear-cut anti-competitive practices dealt a swift and severe blow to the value of the company’s shares, causing Qualcomm’s stock price to plummet 33 percent during the class period, erasing over $32 billion in shareholder value”.

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