Qualcomm Drops 4%: Slashes FYQ3 View as Apple Goes Nuclear – Barron’s
Shares of wireless chip giantÂ QualcommÂ (QCOM) has opened down $2.03, or almost 4%, at $51.19, continuingÂ its pre-market decline,Â after the company this morning slashed half a billion dollars from its outlook for this quarter, saying AppleÂ (AAPL) continues to interfere with payments the company is owed, and will continue to do so during the legal dispute between the two.
Apple stock is up 13 cents at $143.92.
“Qualcomm has been informed by Apple Inc. that Apple is withholding payments to its contract manufacturers for the royalties those contract manufacturers owe under their licenses with Qualcomm for sales during the quarter ended March 31, 2017,â€ said Qualcomm in a statement.
“Apple has indicated it will continue this behavior until its dispute with Qualcomm is resolved.”
WhenÂ I talked with Qualcomm a week ago,Â after its earnings report, the company said its forecast was meant to include a range of possible payment interference from Apple. But clearly, the latest development indicates Apple has chosen the â€œnuclear optionâ€ in blocking payments to Qualcomm, forcing the latter to cut its outlook.
Qualcomm cut this quarterâ€™s outlook, which had been initially made just one week ago, to a range of $4.8 billion to $5.6 billion, down fromÂ $5.3 billion to $6.1 billion previously.
EPS is now seen in a range of 75 cents to 85 cents, down from 90 cents to $1.15.
The interference refers to Apple blocking its contract electronics manufacturers from paying royalties to Qualcomm that they are under contract to pay; Apple doesnâ€™t itself pay royalties directly to Qualcomm.
Said Qualcommâ€™s chief counsel,Â Don Rosenberg,
Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees. These license agreements remain valid and enforceable. While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts. Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade. Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple’s global attack on Qualcomm. We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.
The latest blow may increase chances Intel (INTC) could gain a wider proportion of Appleâ€™s iPhone business, as some have speculated they will.
Intel stock is down $1.44, or almost 4%, at $36, after yesterdayâ€™s Q1 report brought results in the server-chip business that disappointed some Street observers.
Write a Reply or Comment:
You must be logged in to post a comment.