Qualcomm Details Apple Dispute Financials in Earnings Release (Apr 19, 2017)

Qualcomm has just reported its earnings for the March quarter, and one of the most interesting aspects is its commentary on its dispute with Apple. It says that Apple’s suppliers reported but did not pay around $1 billion in royalties in the quarter, which exactly offset the $1 billion Qualcomm is refusing to pay Apple under the Cooperation Agreement the two companies have, and which Qualcomm says Apple breached. Importantly, that Agreement ended in December, so there are no more payments to be withheld, which means if Apple suppliers continue to withhold royalty payments, they’d affect Qualcomm financially going forward in a way they didn’t this past quarter. As such, it’s given a wider EPS guidance range (25 cents) than usual (it was 10 cents in the last two quarters, for example) because of the uncertainty over these royalty payments (the math here is tricky but I reckon that’s about a $400m range in net income terms). Beyond the Apple dispute, the results are a little tricky this quarter because on paper they look terrible, with revenues and profits way down over the same quarter last year. But that’s partly because Qualcomm had to reduce from its GAAP revenues the nearly one billion dollars it’s due to pay BlackBerry as a result of arbitration between the two companies. The actual results are much better, in keeping with recent trends at Qualcomm, lawsuits aside.

via Qualcomm (see also slide deck)

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