Following news that Qualcomm had been charging heightened royalties for use of its tech, as well as reports indicating Qualcomm required Apple to pay a percentage of the iPhone’s revenue in return for the use of Qualcomm patents, Apple has sued the company in three countries.
Apple has an ongoing legal dispute with Qualcomm (QCOM) that heated up last week. That’s when reports emerged that Apple had decided to withhold royalty payments to contract manufacturers that, in turn, pay money to Qualcomm.
Qualcomm is king of the mobile processor industry, but back-to-back-to-back lawsuits by Apple may take a bite.
Apple and Qualcomm are engaged in what will likely be a yearslong and epic battle. Following news that Qualcomm had been charging heightened royalties for use of its tech, as well as reports indicating Qualcomm required Apple to pay a percentage of the iPhone’s revenue in return for the use of Qualcomm patents, Apple has sued the company in three countries.
In the United States, Apple is suing Qualcomm for a hefty $1 billion abut it has also filed a lawsuit in China for $145 million, as well as in the United Kingdom. Now, Qualcomm is following with its own countersuit (but losing quite a bit of money). As a result of Apple’s decision to stop paying all royalties as both companies wait to hear the outcomes of their respective lawsuits, Qualcomm has slashed its profit forecasts. On Friday, Reuters reported that Qualcomm would not receive any royalties from Apple’s contract manufacturers for sales that took place in the first quarter of 2017.
Consequently, Qualcomm has adjusted its revenue estimates, and now is citing a revenue of $4.8 billion to $5.6 billion for its third fiscal quarter, a decrease from its originally anticipated $5.3 billion to $6.1 billion.
“(Apple’s) contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant,” Qualcomm said.
“Without an agreed-upon rate to determine how much is owed, we have suspended payments until the correct amount can be determined by the court,” an Apple spokesman said in an email on Friday.
In a lawsuit filed in January, Apple contends that Qualcomm won’t license its technology to competing manufacturers, which would then be able to make similar chips and sell them at lower prices. Apple says Qualcomm owes it $1 billion in rebates. Apple filed its lawsuit days after the FTC accused Qualcomm of similar anticompetitive behavior.
“They think we owe some amount, we think we owe a different amount, and there hasn’t been a meeting of the minds there,” Cook said. “And at this point we need to courts to decide that unless over time we settle between us on some amount.”
Qualcomm has followed Apple’s lawsuits with one of its own. You can read the full lawsuit here, but it is centered around five complaints against Apple. For example, Qualcomm suggests Apple deliberately didn’t take advantage of the full potential of Qualcomm’s chips in the iPhone 7 in an attempt to prevent them from outperforming Intel’s modems. The iPhone 7 marks the first time in several years that Qualcomm chips are not found in all iPhone variants.
According to Qualcomm, Apple “chose not to utilize certain high-performance features of the Qualcomm chipsets for the iPhone 7 (preventing consumers from enjoying the full extent of Qualcomm’s innovation).” On top of that, when iPhones with Qualcomm chips outperformed devices with Intel’s chips, Apple claimed there was “no discernible difference” between the two.
Another big part of Qualcomm’s suit revolves around Apple’s role in various regulatory suits, and that, according to Qualcomm, Apple has been “misrepresenting facts and making false statements.”
Apple has filed yet another lawsuit against Qualcomm. The two companies were already at war in both the U.S. and in China,and now they’ll be going head to head in the U.K. According to reports, the U.K. lawsuit was actually filed in January, but it’s only now being noticed after being refiled.
While we don’t yet know specifics about the new lawsuit, it does have something to do with patents and designs, according to a report from Bloomberg. It’s likely that it’s similar to the lawsuits Apple has filed in the U.S. and China.
But the effect on Qualcomm, whose shares have already slid 15 percent since the lawsuit was filed by Apple in January, was immediate.
Qualcomm now expects earnings per share between 75 and 85 cents for the April to June quarter. Its previous forecast was for earnings per share between 90 cents and $1.15. Revenue is now expected to be between $4.8 billion and $5.6 billion, down from its previous forecast between $5.3 billion and $6.1 billion. Shares of Qualcomm Inc. tumbled almost 4 percent at the opening bell to $51.22.