Qualcomm Profit Slides as Royalty Dispute Continues
November 01 2017 - 5:16PM
Dow Jones News
By Ted Greenwald
Qualcomm Inc.'s quarterly profit plunged 89%, crippled by a $778
million charge related to a fine by Taiwanese regulators and Apple
Inc.'s continued withholding of patent royalties on iPhones and
iPads.
The penalty imposed by Taiwan in October was Qualcomm's third
since 2015, fallout from a wave of international regulatory
challenges to the company's business practices.
Meanwhile, Apple has withheld fees it owes for its use of
Qualcomm's intellectual property as it battles for lower royalty
rates. The conflict has overshadowed Qualcomm's financial
performance since Apple filed suit in January.
Revenue from licensing intellectual property, which typically
contributes well more than half of Qualcomm's pretax earnings,
plummeted 36%.
Sales of chips for mobile devices rose 13%, continuing their
steady growth in recent quarters.
Over all, Qualcomm on Wednesday reported fourth-quarter revenue
of $5.91 billion, down 4.5% from the same period a year earlier.
Profit was $168 million in the fourth quarter, down from $1.6
billion.
Qualcomm is one of the largest providers of communications chips
for smartphones, and its products form the heart of many higher-end
Android phones. As a holder of patents essential to implementing
cellular standards, Qualcomm collects royalties on nearly every
smartphone sold world-wide, regardless of whether they include the
company's chips.
However, its business is embattled on several fronts. Apple and
Qualcomm are locked in an escalating war over royalty rates, and
Apple has directed the Taiwan-based companies that assemble Apple
devices not to pay royalties for their use of Qualcomm's
technology.
The tussle now threatens to spill into chip sales. Apple uses
Qualcomm's communications chips in a portion of recent iPhones and
iPads, but it has taken steps to eliminate Qualcomm's products from
its next generation of devices, The Wall Street Journal reported
earlier this week.
Regulators in some countries, meanwhile, have determined
Qualcomm uses its dominant position in chips to thwart competitors
and charge exorbitant royalties, bringing fines and demands that
the company change its business practices.
Qualcomm is banking on its pending acquisition of NXP
Semiconductors NV to broaden its product line and give it an avenue
into the automotive industry, where the dollar value of chips built
into cars is growing rapidly. The $39 billion deal has been held up
by European regulators, though, and some NXP owners are holding out
for a higher price.
Qualcomm's shares were up 0.8% in after-hours trading, after
finishing 4 p.m. trading in New York up 4.8% to $53.46. As of
Wednesday's close, the stock's price has fallen roughly 17% since
Apple first took legal action against Qualcomm in January.
The San Diego, Calif., chip maker reported per-share earnings of
92 cents on an adjusted basis, omitting share-based compensation
and other items. Analysts had expected 81 cents a share on $5.8
billion in revenue, according to a survey by Thomson Reuters.
For the current quarter ending in December, Qualcomm forecast
adjusted per-share earnings between 85 cents and 95 cents on
revenue between $5.5 billion and $6.3 billion.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
November 01, 2017 17:01 ET (21:01 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Mar 2024 to Apr 2024
Apple (NASDAQ:AAPL)
Historical Stock Chart
From Apr 2023 to Apr 2024