Late April, Qualcomm lowered its third-quarter revenue forecast amid the dispute with Apple, which claims it is being charged "at least five times more in payments than all the other cellular patent licensors we have agreements with combined".
Net income attributable to the company fell to $866 million, or 58 cents per share, in the third quarter ended June 25 from $1.44 billion, or 97 cents per share, a year earlier.
So far this year, Qualcomm's shares are down almost 13%.The descent began after Apple sued the company in January for $1 billion, saying its communications chip licensing terms were too onerous.The S&P 500 SPX, +0.54%, in contrast, is up about 10.5% year to date. In the latest development, Apple manufacturers Foxconn, Pegatron Corporation, Wistron Corporation, and Compal Electronics have accused Qualcomm of violating two sections of the Sherman Act, a landmark U.S. antitrust law.
Qualcomm Chief Executive Steve Mollenkopf said on the earnings conference call that he expects the dispute with Apple to be settled out of court. It was reported this week that a number of contract manufacturers based in Taiwan, including Foxconn, filed suit in USA courts against Qualcomm.
In the past, almost 70 percent of Qualcomm Inc profits came from its licensing business. Apple told its contract manufacturers to withhold license payments from Qualcomm while the dispute played out, which prompted Qualcomm to sue them in May. Its Snapdragon chip system can be found in the most popular Android phones, its wireless modems are found in roughly half of all iPhone 7 handsets, and it sells chips or licenses patents to many other companies. In the third quarter of 2016, Qualcomm reported EPS of $1.16 on revenues of $6 billion.
Through contract licensing arrangements, Qualcomm effectively supplies millions of processors to Apple for use in its iPhone and iPad devices. Recognizing this, Qualcomm is trying to bring its chip development expertise to new markets to accelerate growth.
While the drop in revenue is significant, Qualcomm's quarterly income still manages to beat most analyst predictions.
In reply to these counter accusations from Apple, Qualcomm claimed that it did not simply charge the royalty for the chips housed in the iPhones, but also the other minor technologies without which the devices would never be able to work.
Qualcomm has denied these allegations.
"It is clear Apple is controlling all of the contract manufacturer statements and actions in the litigation". Consequently, Apple argues that Qualcomm is collecting significantly more money from Apple than it is entitled to.
On an adjusted basis that excludes items including stock-based compensation, Qualcomm reported per-share profit of 83 cents.
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