Qualcomm to Receive $4.5 Billion from Apple

Posted on May 1, 2019 by Paul Thurrott in Apple with 16 Comments

Qualcomm revealed that Apple will pay it approximately $4.5 to $4.7 billion to dismiss all litigation between the two companies. The announcement came as part of Qualcomm’s quarterly earnings report, and the payment “includes a cash payment from Apple and the release of related liabilities,” the firm said.

“We delivered a better than expected quarter with earnings per share above the high end of our estimates” Qualcomm CEO Steve Mollenkopf said in a prepared statement. “We are also pleased to have reached multi-year agreements with Apple and look forward to continuing to support them as a customer. We are executing well on our strategic priorities as 5G commercial launches begin around the world. Our 5G technology and product leadership, as well as our expansion into new industries and product categories, creates a strong foundation for long-term revenue and earnings growth.”

For the quarter ending March 31, Qualcomm recorded net income of $700 million on revenues of $5 billion. But Qualcomm’s financials, alas, have been struggling thanks to the Apple legal battle and to slowing growth in China, where surging industry powerhouse Huawei uses its own chipsets.

The Apple issue may be settled, but China is not, and Qualcomm warned that its inability to conquer that market will hinder sales for the rest of the year. “You’re going to see Chinese weakness reflected in the next couple of quarters,” Mollenkopf told Bloomberg.

As for the Apple payment, Qualcomm said it will “consist of a payment from Apple and the release of our obligations to pay or refund Apple and the contract manufacturers certain customer-related liabilities.” It is expected to come in the current quarter.

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Comments (16)

16 responses to “Qualcomm to Receive $4.5 Billion from Apple”

  1. pecosbob04

    So Apple is paying less than the $6B it was withholding? Sounds like a win to me.

    • provision l-3

      In reply to pecosbob04:

      Not really, Qualcomm was holding back a billion it owed Apple. So 6-1=5 which is about what Apple is paying. Qualcomm also gets future licensing fees and hardware sales. Apple may or may not have gotten better licensing terms but I think its safe to say this was clearly a win for Qualcomm.

      • skane2600

        In reply to provision l-3:

        And IMO, it's as it should be. Over the years Apple has come up with some great ideas but these high-end modems are in a different class of high tech than smartphones.

        • provision l-3

          In reply to skane2600:

          Qualcomm definitely has the best modems in the market but that wasn't what the lawsuit and settlement was about. I didn't see the evidence and really don't have the legal background to make a judgment even if I had so I'm content in having no opinion in how the case would/should have played out had it proceeded. But as it was resolved was nothing short of a win for Qualcomm.

      • BrianEricFord

        In reply to provision l-3:

        its really tough to say what’s a win in a settlement without knowing all of the internal back and forth, but it’s probably safe to say this is a win for Qualcomm and “not a loss” for Apple.

        Qualcomm has other issues to worry about, so settling this with Apple even if they had a good chance to win (and maybe even win much more than they settled for) is a great way to clear the table of something that would have dragged on and on.

        Apple obviously had a good starting hand and then drew a bad card (came up Intel), but given that the alternative was to just owe Qualcomm the same amount (or more) that they eventually “settled” for, it’s not all that bleak for Apple, either.

        And, again, Qualcomm isn’t out of the woods, is now more of a monopoly than ever, and Apple has a few years to figure out how to ditch 3rd parties altogether.

        • provision l-3

          In reply to BrianEricFord:

          Yeah, no one really knows the full details of the deal just the numbers thrown around and that litigation has been dropped. So my comment about being a win for Qualcomm are based on what is known.

          You are correct about Qualcomm though. We are still waiting for the verdict of the FTC vs. Qualcomm trial. I’m guess a bunch of people don’t know that is still out there. Many media outlets, like Thurrott, incorrectly reported it as a lawsuit between Apple and Qualcomm rather the federal government suing Qualcomm.

  2. wocowboy

    Maybe Qualcomm should begin suing the Chinese companies who make cellular radio chips that violate all the patents and intellectual property they own. Qualcomm does have a virtual monopoly on cellular radio chips and technology, so to better their outcome in the Chinese markets they might employ the same tactics that have worked around the rest of the world against Apple, Intel, the EU, and elsewhere.

    • CrownSeven

      In reply to wocowboy:

      And what practices are those? Suing to protect their intellectual property, patents, and licensing models?

    • evox81

      In reply to wocowboy:

      Because suing Chinese companies in China always works out really well.

    • wocowboy

      In reply to wocowboy:

      OK, I give, having a monopoly is a good thing, I get it now. And FRAND was a concept that was bad and should never have come about. And one source of cellular radio chips from a company that can charge any price it wants for those chips, or charge a percentage of a phone's selling price for the use of those chips and intellectual property, is an OK thing. Now you people need to convince the rest of the planet that this is a good thing.

    • Ezzy Black

      In reply to wocowboy:

      In this case, Apple sued Qualcomm. There was a counter-suit being heard as well.

      If you got a chance to see the slides Qualcomm presented in their opening arguments, they were pretty incriminating. They had internal documents that showed Apple had planned the suit years in advance as a strategic business play and others that discussed what evidence they needed to "create" to make it work.

      Apple settled before even giving their own opening argument.

      So Apple sued Qualcomm for a cool 1 billion dollars and instead paid them 4.5 billion after opening arguments. I'm not entirely sure how much of the 4.5 billion they already owed them however, as they had stopped paying royalties when the suit was filed.

  3. glenn8878

    I would think that Apple slightly lowered the amount to pay, but not too much. Still, it was a capitulation and they tanked their Intel collaboration. Think of how much money Apple lost to the doomed Intel modem. I'm sure Apple lost sales to those that didn't have confidence their modems are up to decent speeds. I was ready to ditch my iPhone if it couldn't have 5G in 2 years. No more excuses.

  4. Andi

    This settlement is worse for all involved. Qualcomm remains unchallenged in bundling licensing with the chipset business. This is where I hoped Qualcomm would lose. If your smartphone has a Snapdragon inside, an Exynos or an A-series the licensing should be the same. As it stands Snapdragon gets a better deal.

    On the other side Apple has always wanted to demolish the percentage per smartphone price model that is the current standard; standard that made the world go mobile and has worked pretty well for Apple itself. A loss here for Apple would cement Qualcomm's model and by ricochet Nokia and Ericsson's. Good for everyone involved.

  5. bill_russell

    Some analysts belive it might have been the end of Qualcomm if Apple won. Again approaching 1 Trillon market cap, Apple just wanted to force an unjustified lower rate and you can bet any savings wouldn't have passed on to consumers. How much was it Apple wanted from Samsung just for copying some icons and rounded corners, never mind this sort of modem technology. Intel just couldn't match Qualcomm and the best tech is priced accordingly.

  6. michael_babiuk

    I really get a big kick out of reading these settlement figures. In Apple's recent Q2 Financial statements, Tim Cook stated both Apple and Qualcomm had agreed to keep the settlement amounts secret. I'm betting if Paul was really pressed to defend that 4.5 Billion settlement figure, he would have to defer and say, "Well, I did read about it on the Internet - so it must be true." Very Big Grin.

  7. dontbe evil

    love to see apple beaten with their own style