BlackBerry wins RM3.7 billion royalty refund from Qualcomm
BLACKBERRY stock rose the most in more than two years after it was awarded US$ 814.9 million ( RM3.7 billion) to end a dispute with Qualcomm Inc. over royalty payments, giving it cash needed to help recast itself as a software maker.
The two companies had agreed to enter binding arbitration to settle claims by BlackBerry that it was owed refunds on technology licensing fees prepaid to the chip maker. The announcement sent BlackBerry shares up as much as 19 per cent in New York, the most intraday since January 2015.
The refund from Qualcomm will boost BlackBerry’s cash hoard, which stood at US$ 1.7 billion at the end of its fiscal fourth quarter, helping Chief Executive Officer John Chen as he spends more money to shift the company’s focus to software and security-focused products.
BlackBerry no longer makes the phones that used Qualcomm technology and argued that it was due a refund after sales collapsed.
“With BlackBerry planning to invest for growth in its software businesses, the surprising arbitration award and US$ 815 million in cash from Qualcomm will bolster BlackBerry’s balance sheet and increase the likelihood of acquisitions to augment growth,” Canaccord Genuity technology analyst Michael Walkley wrote Wednesday in a report. He raised his price target on BlackBerry to US$ 9.50 from US$ 8.
Qualcomm, which owns patents that cover the fundamentals of modern mobile technology, gets a cut of the selling price of handsets from phone makers, whether they use its chips or not.
The San Diego-based semiconductor maker gets the majority of its profit from those license payments.
In 2010, before its smartphone business collapsed, Waterloo, Ontario-based BlackBerry signed a nonrefundable agreement with Qualcomm covering royalty payments through 2015, Walkley said in his note. It shipped far fewer phones than it expected, leading it to seek a refund on some of the payments, he wrote.
The chipmaker, the biggest producer of semiconductors that run smartphones, faces the refund bill while trying to fend off multiple lawsuits and regulatory actions targeting its lucrative licensing business.
Earlier this week, it countersued Apple, one of its biggest customers, escalating a fight in which it’s accused of illegally trying to maintain a stranglehold over the market for phone components.
Qualcomm countered that Apple is behind a global push to break the chipmaker’s business model because the iPhone maker wants to pay lower fees.
Qualcomm last Wednesday said it disagreed with the outcome of the arbitration proceeding with BlackBerry, but noted the decision is binding and can’t be appealed.
“The arbitration decision was limited to prepayment provisions unique to BlackBerry’s licence agreement with Qualcomm and has no impact on agreements with any other licencee,” the company said. — WP-Bloomberg