Qualcomm slashes profit forecasts as Apple stops royalty payments pending legal ruling

Qualcomm has substantially cut both revenue and profit forecasts as it revealed that Apple has ceased all royalty payments to the company pending the outcome of lawsuits between the two companies …

Qualcomm’s general counsel Don Rosenberg described the move as a ‘global attack’ by Apple, seemingly referring to the fact that Apple suppliers are already withholding royalty payments

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.

Reuters reports that Qualcomm’s stock price fell on the news.

The company said it now expects current-quarter revenue of $4.8 billion-$5.6 billion, down from the $5.3 billion-$6.1 billion it had expected previously. Shares of Qualcomm fell 4.3 percent to $50.91 in premarket trading, while shares of Apple were up marginally at $143.92.

Apple originally sued Qualcomm, claiming that it had been charging royalty fees for technology it didn’t own, and that it had been over-charging for tech that it did, as Tim Cook recently explained.

They were insisting on charging royalties for technologies that they had nothing to do with, and so we were in a situation where the more we innovated with unique features like Touch ID, or advanced displays, or cameras, the more money Qualcomm would collect for no reason, and the more expensive it would be for us to innovate.

It has since expanded its legal action against the company, with additional lawsuits in both China and the UK.

Although the impact of Qualcomm losing the cases would be substantial, it can at least take comfort from the fact that it is not one of the six companies that depend on Apple for half to three-quarters of their sales.

Photo: Reuters/Mike Blake