Qualcomm expects $4.5B revenue from Apple settlement

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Appleosophy | Qualcomm expects $4.5B revenue from Apple settlement
kentucky fried licensing

Qualcomm reveled during its earnings call today that it expects $4.5B to $4.7B revenue from the unexpected settlement with Apple. Qualcomm says that it is continuing to assess the impacts of the deal on the company. The estimates are expected to go up, as this figure is calculated just based on the direct revenue and associated liabilities.

Meaning, Qualcomm isn’t obligated to refund Apple or its suppliers.

While we continue to assess the accounting impacts of the agreements, our financial guidance for the third quarter of fiscal 2019 includes estimated revenues of $4.5 billion to $4.7 billion resulting from the settlement (which will be excluded from our Non-GAAP results), consisting of a payment from Apple and the release of our obligations to pay or refund Apple and the contract manufacturers certain customer-related liabilities.

Qualcomm's industry practices

The figure also doesn’t represent the royalties Apple has to pay. Qualcomm is well known for double charging their clients – licensing and direct payments. There have been much controversial talks about Qualcomm’s industry practices.

Apple attorney Ruffel Cordell compared Qualcomm’s practices to a KFC (Kentucky Friend Chicken) restaurant that won’t sell a bucket of chicken to its clients. 

“You first have to go over to this different counter, KFL – Kentucky Fried Licensing,” Cordell said to the jury. “You have to go pay that ‘eating license’ fee before they’ll sell you any chicken.”

No License, No Chips
Ruffel Cordell
Attorney, Apple

Qualcomm justified saying that its portfolio of over 130,000 patents include technology in all chips, and they have to protect the technology regardless of the chipset that a company purchases from them.

Apple's Q2 earnings

Apple reported its Q2 results recently, but didn’t comment on any of the financial impacts caused by the Qualcomm settlement, in typical Apple fashion. iPhone shipments are also low compared this quarter compared to last year. 

The estimated pay-off from Apple to Qualcomm is put around $6B.

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.
Steve Mullencopf
CEO, Qualcomm

Source: 9to5MacReuters


Praveen Nagaraj
Author: Praveen Nagaraj

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