How Qualcomm Is Ramping Up Its Legal Battle With Apple

By Chris Lange Updated Jan 12, 11:56AM EST · Published May 17, 9:50AM EDT

Follow 24/7 Wall St. on Google

This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.

How Qualcomm Is Ramping Up Its Legal Battle With Apple — © Thinkstock

[cnxvideo id=”655422″ placement=”ros”]Qualcomm Inc. (NASDAQ: QCOM) is ramping up its legal dispute with Apple Inc. (NASDAQ: AAPL) in regard to its refusal to pay royalties on this semiconductor giant. The lawsuit was filed Wednesday in a U.S. federal district court against iPhone manufacturers Pegatron, Foxconn Technology, Wistron, and Compal Electronics for infringing patent-licensing agreements with Qualcomm.

Ultimately this lawsuit is looking to secure the royalties that have been withheld, as well as to maintain a continuous flow of these royalties according to the previous agreement.

Apple commented in April that it had suspended royalty payments to Qualcomm because the two companies had not been able to work out a deal. Apparently these two companies have been trying to reach an agreement for over five years.

In fiscal 2016, Qualcomm’s patent-licensing segment actually made up 80% of the firm’s profit, with Apple royalties making up 12% of the total revenues and as much as 30% of its earnings per share (EPS). When Apple suspended its royalty payments in April, and it became clear that this would persist, Qualcomm cut its guidance for the current quarter.

[nativounit]

In terms of the guidance for its fiscal third-quarter, Qualcomm said that it now expects EPS to be in the range of $0.75 to $0.85 and revenues between $4.8 billion and $5.6 billion. Analysts have since adjusted their estimates and now currently expect $0.81 in EPS and $5.26 billion in revenue.

At the time, Don Rosenberg, executive vice president and general counsel of Qualcomm, commented:

Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees. These license agreements remain valid and 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. Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade. Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple’s global attack on Qualcomm. We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.

Shares of Apple were last seen down 0.7% at $154.35, with a consensus analyst price target of $152.96 and a 52-week trading range of $91.50 to $156.65.

Qualcomm were trading down 0.3% at $55.77. The 52-week range is $50.84 to $71.62, and a consensus price target is $60.72.

[wallst_email_signup]

About the Author Chris Lange →

Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics.

Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications.

A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.