Qualcomm slashes forecasts after Apple stops licence payments
SAN FRANCISCO: Apple Inc cut off billions of dollars in payments to Qualcomm Inc, turning a contract dispute into what one analyst called an “all-out war” that forced the chip supplier to slash forecasts given only days ago.
The world’s largest publiclytraded technology company and one of the main suppliers of components to the iPhone, its most important product, have traded accusations of lying, making threats and trying to create an illegal monopoly.
The fight involves billions of dollars of technology licensing revenue that, if permanently cut off or reduced, would damage Qualcomm’s main source of profit and help bolster Apple’s margins.
Apple told Qualcomm it would stop paying licensing revenue to contract manufacturers of the iPhone, the mechanism by which it has paid the chipmaker since the best-selling smartphone debuted in 2007, said the San Diego-company in a statement.
Qualcomm said revenue in its fiscal third quarter ending June would be US$4.8 billion (RM20.8 billion) to US$5.6 billion, down from last week’s prediction of US$5.3 billion to US$6.1 billion.
It’s also short of the US$5.78 billion average of analyst estimates compiled by Bloomberg.
For Qualcomm, Apple’s move is a further infringement on its legal agreements with the contract makers of the iPhone, who also make devices for other firms. Those agreements predate Apple’s entry into the phone market and are still legally enforceable.
“While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts,” said Don Rosenberg, Qualcomm’s general counsel. “Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade.”
He said Apple’s interference with Qualcomm’s agreements to other parties was wrongful and part of the company’s global attack on Qualcomm.
Stacy Rasgon, an analyst at Sanford C. Bernstein, said Qualcomm’s largest customer had declared “all-out war”, leaving a dark cloud over earnings and its stock price.
“Even if one believed this was a worst case scenario, we struggle to see a resolution any time soon as the parties entrench.”
Patents controlled by Qualcomm cover the basics of all highspeed data capable mobile phone systems. It charges a percentage of the total selling price of the phone regardless of whether the device uses a Qualcomm chip or not. Bloomberg