April 23, 2017

Qualcomm results beat help allay worries over Apple dispute

21 April 2017, 02:56 | Ross Houston

CORRECTED - Chipmaker Qualcomm's revenue falls 9.6 percent

Chipmaker Qualcomm's revenue, adjusted profit beat estimates

It is not clear whether Apple's contract manufacturers will underpay royalties owed under their contracts with us in the third quarter of fiscal 2017, which could have a negative impact on our financial results. However, our revenues were not negatively impacted as the contract manufacturers acknowledged the amounts are due and the underpayment was equal to the amounts that Qualcomm has not paid Apple under our Cooperation Agreement (that expired Dec 31, 2016) that are now in dispute.

The amount of the shortfall was redacted from a countersuit that Qualcomm filed against Apple on April 10.

The San Diego-based chipmaker reported Q2 earnings per share (EPS) of $1.34, which was $0.14 better than the Wall Street consensus estimate of $1.20.

Despite the litigation worries, revenue in the Qualcomm Technology Licensing business rose about 5 percent to $2.25 billion, ahead of the analysts' estimate of $2.24 billion, according to research firm FactSet StreetAccount.

Apple's legal action came after anti-trust regulators in South Korea and the US challenged Qualcomm patent licensing business. Net income fell from $1.2 billion last year to $700 million this year. Qualcomm has called Apple's claims "baseless" and has accused Apple of "encouraging regulatory attacks".

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For the quarter ended in March, analysts are expecting the company to report earnings of $1.19 per share on revenue of $5.9 billion. Market share gains in China, chip sales for the launch of Samsung's new Galaxy S8 and catchup royalty payments in China were driving the expected results.

Qualcomm also raised its quarterly dividend by 7.5% from$0.53 per share to $0.57. Shortly after the FTC filed its complaint, Apple levied a lawsuit against Qualcomm, accusing the company of charging unfair royalties for "technologies they have nothing to do with".

Rasgon, the Bernstein analyst, noted that in past patent spats with LG and others, Qualcomm has deferred recognizing royalty revenue from the company involved - even when it had already received payment - until a resolution was reached.

It could take the same stance with Apple, which appears to be ready for a long fight, Rasgon said.

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