Qualcomm profit plummets nearly 90 percent amid Apple legal spat

Posted:
in General Discussion edited November 2017
Qualcomm posted quarterly earnings on Wednesday, noting a precipitous 89.7 percent decline in profits as the chipmaker faces a huge $778 million fine from Taiwanese regulators and an ongoing legal scrum with Apple.




For its just ended fourth fiscal quarter, Qualcomm posted net income of $168 million, down from $1.6 billion in 2016, reports Reuters.

Earnings per share came out to pegged at 92 cents, while revenue sat at $5.91 billion. The performance beat Wall Street estimates, bumping company stock in after hours trading.

Though Qualcomm beat the Street, it noted earnings "were negatively impacted as a result of actions taken by Apple and its contract manufacturers."

Qualcomm is embroiled in an intensifying legal battle with Apple, which now spans multiple jurisdictions around the world. Apple has continued to withhold patent licensing fees attributable to iPhone and iPad as the two companies duke it out in court.

Apple fired the first shot in January when it filed a nearly $1 billion suit against Qualcomm claiming unpaid rebates withheld over Apple's part in a South Korean antitrust investigation. In its suit, the iPhone maker pointed to potential anticompetitive practices, saying Qualcomm exploits its "monopoly power" to charge exorbitant licensing fees tied to critical smartphone IP.

Apple has since filed two lawsuits in China with similar accusations.

In April, Apple suppliers followed the tech giant's example and began withholding royalty payments on licensed Qualcomm IP. Further hurting the chipmaker's bottom line is a $773 million fine handed down by Taiwan's Fair Trade Commission, which found Qualcomm guilty of anti-trust and monopolistic tactics.

Following up on tough talk about Apple's suit, and findings by regulatory bodies, Qualcomm filed a countersuit earlier this year citing breach of contract. The chipmaker also lodged a complaint with the U.S. International Trade Commission, asking the agency to halt the import of iPhone and iPad products.

Most recently, Qualcomm filed lawsuits in Germany and China in an attempt to halt import and sale of iOS devices on the basis of patent infringement.

Qualcomm CEO Steve Mollenkopf has repeatedly played off Apple's advances, saying the legal battle comes down to IP pricing. Mollenkopf suggests Apple is using the legal process as a bartering tool for better licensing deals, saying he believes the spat will be settled out of court.

Reports this week suggest Apple is serious about replacing Qualcomm as a key component manufacturer. The company is supposedly trialling test designs of future iPhone and iPad hardware that replace Qualcomm modems with parts from Intel and MediaTek.
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Comments

  • Reply 1 of 22
    sflocalsflocal Posts: 4,128member
    Great job Apple.  Qualcomm needs to be beaten below ground level.

    If that kind of decline in revenue is attributed to Apple, Qualcomm has to have the most moronic management running the circus for alienating the one company that provides it the majority of its revenue.

    Way to go stupid.  You bit the hand that feeds you, and that's what you deserve.  I hope QCOM crashes and burns.
    anton zuykovcalijbdragonmagman1979pscooter63patchythepirateracerhomielostkiwianantksundaramstarwars
  • Reply 2 of 22
    Qualcomm, or should I say it's 'leadership' really does not seem to understand what the company does, or what they used to do, that mattered. Seems to me they are in much bigger trouble than they admit. It almost smells like Blackberry a few weeks after the iPhone introduction. They just spun BS. Hoping something would stick. Meanwhile the 'leadership' sell their stock holdings in their company and get ready for the collapse. Companies that think they are irreplaceable usually are.
    edited November 2017 jbdragonmagman1979pscooter63patchythepiratestevenozanantksundaramradarthekatwatto_cobrajony0
  • Reply 3 of 22
    If Apple experienced this revenue decline the stock would tank. QCOM... it bumps... oooookaaaaayyyy....
    racerhomiedanhwatto_cobra
  • Reply 4 of 22
    calicali Posts: 3,495member
    I’m no stock expert but how the f*** does their stock rise after this news?????
    jbdragonmagman1979pscooter63racerhomieslprescottdanhadm1watto_cobrajony0
  • Reply 5 of 22
    dewmedewme Posts: 1,403member
    For the sake of the Qualcomm employees and stakeholders I hope Apple and Qualcomm can reach an amicable agreement and move on. I still see Qualcomm in a favorable light because I had an opportunity to work for Qualcomm a while back and was very impressed with their people and work environment. The people who are most at risk there are the ones who don't have a lot of sway in the decision making taking place at the upper levels of the company. The high level executives are probably set up pretty well with hefty compensation packages and golden parachutes, so no matter what happens they will have a soft landing. The rank and file technical workers, engineers, scientists, support staff, and middle managers on the other hand are much more vulnerable. Thankfully a lot of them have the technical and professional chops to find a new home with other firms if the execs decide to scuttle the QCOM ship with a protracted litigation against one of their bigger customers. Qualcomm's BOD should intervene. 
    Rayz2016patchythepiratechiafotoformatksecviclauyyc
  • Reply 6 of 22
    Qualcomm’s stock is rising because an analyst got on CNBC this morning and said it wouldn’t be easy for Apple to drop Qualcomm. After that Qualcomm’s stock started rising. The one thing you can always expect from any analyst is to prop up Apple competitors.
    calimagman1979pscooter63racerhomielostkiwichiaradarthekatadm1watto_cobrajony0
  • Reply 7 of 22
    Fire that qualcom ceo, no good...
    stock up BUT lost closer to 90%? Im surprise he is still the ceo??
  • Reply 8 of 22
    GG1GG1 Posts: 177member
    dewme said:
    For the sake of the Qualcomm employees and stakeholders I hope Apple and Qualcomm can reach an amicable agreement and move on. I still see Qualcomm in a favorable light because I had an opportunity to work for Qualcomm a while back and was very impressed with their people and work environment. The people who are most at risk there are the ones who don't have a lot of sway in the decision making taking place at the upper levels of the company. The high level executives are probably set up pretty well with hefty compensation packages and golden parachutes, so no matter what happens they will have a soft landing. The rank and file technical workers, engineers, scientists, support staff, and middle managers on the other hand are much more vulnerable. Thankfully a lot of them have the technical and professional chops to find a new home with other firms if the execs decide to scuttle the QCOM ship with a protracted litigation against one of their bigger customers. Qualcomm's BOD should intervene. 
    I don't want to see Qualcomm go away. Qualcomm design good products, but their upper management is beyond arrogant. Hopefully this issue can bring their management back to earth, revise their licensing costs, and get back to (honest) business.

    jbdragondewmeteknishnracerhomiewatto_cobrajony0
  • Reply 9 of 22
    jd_in_sbjd_in_sb Posts: 1,479member
    Apple could buy Qualcomm with the change in their couch. Interesting that the ceo feels that attacking Apple, rather than renegotiate IP prices, is the better strategy
    edited November 2017 calibeowulfschmidtwatto_cobra
  • Reply 10 of 22
    The stock is up after hours so must have been something Wall Street was expecting.
  • Reply 11 of 22
    calicali Posts: 3,495member
    dewme said:
    For the sake of the Qualcomm employees and stakeholders I hope Apple and Qualcomm can reach an amicable agreement and move on. I still see Qualcomm in a favorable light because I had an opportunity to work for Qualcomm a while back and was very impressed with their people and work environment. The people who are most at risk there are the ones who don't have a lot of sway in the decision making taking place at the upper levels of the company. The high level executives are probably set up pretty well with hefty compensation packages and golden parachutes, so no matter what happens they will have a soft landing. The rank and file technical workers, engineers, scientists, support staff, and middle managers on the other hand are much more vulnerable. Thankfully a lot of them have the technical and professional chops to find a new home with other firms if the execs decide to scuttle the QCOM ship with a protracted litigation against one of their bigger customers. Qualcomm's BOD should intervene. 
    Or Apple could scrape the remaining talent after they go out of business. 
    racerhomieradarthekat
  • Reply 12 of 22
    QCOM isn't at an historic low... for the past 5 years... but it is low. Wall Street spin may be trying to save some people's money.


  • Reply 13 of 22
    adonissmuadonissmu Posts: 1,770member
    The market clearly doesn't believe Apple can find a viable competitor. 
    Rayz2016
  • Reply 14 of 22
    That would’ve been a beautiful one for Qualcomm shorts.
  • Reply 15 of 22
    radarthekatradarthekat Posts: 2,428moderator
    cali said:
    dewme said:
    For the sake of the Qualcomm employees and stakeholders I hope Apple and Qualcomm can reach an amicable agreement and move on. I still see Qualcomm in a favorable light because I had an opportunity to work for Qualcomm a while back and was very impressed with their people and work environment. The people who are most at risk there are the ones who don't have a lot of sway in the decision making taking place at the upper levels of the company. The high level executives are probably set up pretty well with hefty compensation packages and golden parachutes, so no matter what happens they will have a soft landing. The rank and file technical workers, engineers, scientists, support staff, and middle managers on the other hand are much more vulnerable. Thankfully a lot of them have the technical and professional chops to find a new home with other firms if the execs decide to scuttle the QCOM ship with a protracted litigation against one of their bigger customers. Qualcomm's BOD should intervene. 
    Or Apple could scrape the remaining talent after they go out of business. 
    Or immediately.  Raid the place for all the talent they can hire.  
    watto_cobra
  • Reply 16 of 22
    So... Qualcomm loses nearly a billion or 90% and it "beat the street?" As in this is what was projected?

    youre kidding. This is a death knell. 

    If if it were Apple, you'd be hearing Michael Dell trudging out that infamous old quote...

    qualcomm had better find a way to drastically alter their business model. 

    Not only are their mob tactics being exposed and likely overturned, but they've ruined their reputation and thus their brand. Relationship have been broken over trust issues that will not be repaired. 

    It appears their is either a sympathizer or a "friend" at Wall Street. We will see how long that lasts. 
    edited November 2017
  • Reply 17 of 22
    stevenoz said:
    QCOM isn't at an historic low... for the past 5 years... but it is low. Wall Street spin may be trying to save some people's money.


    Wall Street doesn't try to save people money unless they are investors. 

    They undeservedly hampered AAPL for years. Didn't care about saving this investors money. 

    Here we hsve a company that ihas lost nearly ALL (90%!!) and their investors are supposed to be OK?

    total collusion going on. 

    This company will either fold or be sold. 
  • Reply 18 of 22
    ksecksec Posts: 1,490member
    So Qualcomm went from 1600M to 160M, with 770M fine from Taiwan.

    I am going to assume Apple contribute 670M to their profits? Assuming everything else being equal to last year.

    Since Apple continue to buy chips from Qualcomm, which means Apple contribute a lot more then the 670M estimate.

    Assuming  a typical 30% Net margin for Chips, 120M unit @ $25 each / year.

    Roughly $225M Profits / Q.

    Or In total roughly $900M per Q, that is Apple contribution to Qualcomm's profits.

    Even if we round it down to $800M, that is saying Apple account for roughly 50% of Qualcomm's profits.

    Somewhere along the lines tell me the numbers aren't right. Correct me where i am wrong.
    edited November 2017
  • Reply 19 of 22
    sflocal said:
    Great job Apple.  Qualcomm needs to be beaten below ground level.

    If that kind of decline in revenue is attributed to Apple, Qualcomm has to have the most moronic management running the circus for alienating the one company that provides it the majority of its revenue.

    Way to go stupid.  You bit the hand that feeds you, and that's what you deserve.  I hope QCOM crashes and burns.
    The huge decline we're talking about wasn't in revenue, it was in GAAP income. If it was in revenue (or even in non-GAAP income), that would represent a much different level of problematic. The YoY revenue decline was in the single digits.

    As for what Qualcomm management has been doing lately, we should understand that it's been about salvaging what they can on the investor relations front (and, I suspect, trying to provide them with some cover down the road when investor suits come). It has been desperate, yes; but not in trying to hold off the damage that has been and will be done to its business model. I think Qualcomm management understands that the chickens are going to come home to roost and that there's nothing they can do to prevent that. There just aren't many moves for Qualcomm to make that might allow it to avoid the pain that's coming as a result of what it's done in the past. Can it mitigate that pain to some extent? Perhaps, but not to a great extent. So it's doing what it can - putting on a brave face in order to, among other things perhaps, try to support the stock price.

    On the other hand, Qualcomm has benefited tremendously from the improper things it's done in the past for which it is now going to have to pay a price. It has been more profitable than it otherwise would have been and it is likely better positioned when it comes to newer technology (and standards) than it would have been otherwise. It effectively (though improperly - e.g., illegally in many places and, at any rate, in ways that violated contractual commitments) leveraged its dominance in aging technology to increase its importance in emerging technology, by stifling competition and extracting (read: extorting) for itself more resources which it could devote to trying to ensure that importance.

    So, all things considered, Qualcomm may well end up better off than it would have been had it not engaged in the practices which now have it in hot water. The price it will pay may well end up being less than the benefits gained. It would, of course, be better off going forward if its improper business model wasn't being torn apart as it is now. But I don't think it would be better off now (and going forward) if it hadn't employed that improper business model in the past.

    I don't think Qualcomm is going to crash and burn. It just won't be as profitable as it could have been had it been allowed to continue to get away with the kinds of things it was getting away with before.
  • Reply 20 of 22
    cali said:
    I’m no stock expert but how the f*** does their stock rise after this news?????
    Because the biggest part of this isn't news. We already knew about the Taiwan FTC's fine. And what news there was in the earnings report yesterday - i.e., what we found out which we didn't already know or expect - was fairly positive.

    To the extent that investors thought the actions taken by Taiwan's FTC should impact the stock's valuation, that would have been mostly priced in before yesterday. There were some other 'Other Items' (i.e. things which affected GAAP income, but not non-GAAP income) that contributed to the YoY earnings decline. But those too might have been expected and, at any rate, didn't have as large an impact as accounting for the fine from Taiwan.
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