Qualcomm CEO Favors Out-Of-Court Settlement With Apple

Qualcomm CEO Favors Out-Of-Court Settlement With Apple
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The Apple and Qualcomm dispute has been all over the news over the past few months. However, Qualcomm appears to be in the mood to put an end to this battle, as the head of the company is talking about the possibility of an out-of-court settlement.

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Is an out-of-court settlement a viable option?

On Monday, Qualcomm CEO Steve Mollenkopf tried to draw similarities in the ongoing fight with Apple with the various other legal fights with other corporate entities that the company has been embroiled in. Mollenkopf stated at the Brainstorm Tech Conference in Aspen that there is nothing “new going on.”

Referring to the Apple and Qualcomm dispute, the CEO said, “Those things tend to get to resolved out of court and there’s no reason why I wouldn’t expect that to be the case here.”

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Mollenkopf stated that the company works on “core technologies” that are to be implemented in later years, and that is one reason why it gets involves in legal disputes.

An out-of-court settlement looks like a viable option, considering that both companies need each other. Moreover, Qualcomm can supply the best automotive technologies in the future through the acquisition of the automotive chip maker NXP Semiconductors, notes Market Realist. If Apple gets into the smart driving market going forward, Qualcomm could give the company a much-needed push by supplying automotive chips.

What’s the Apple and Qualcomm dispute all about?

A few weeks ago, Qualcomm filed a patent infringement suit against Apple, asking for a ban on iPhone imports in the United States. However, it was Apple that filed the suit first, claiming that Qualcomm has taken unfair advantage from its dominance in the mobile chip market and demands unfair royalties.

In April, Apple stopped paying royalties to its contract manufacturers for certain phone patents owned by Qualcomm over some “unresolved issue.” The Cupertino, California-based company claims that Qualcomm is raking in revenue two times, once by charging for the licensing fee for the use of its patent technology and then for the chip, which runs on that technology.

Earning revenue by licensing the technology is one of the consistent and major sources of Qualcomm’s income. The company stated that since Apple has breached its contract with two other companies, the lawsuit filed in January against them by Apple should be rejected.

Analysts more focused on iPhone 8

Meanwhile, analysts are not very concerned about the Apple and Qualcomm dispute and its effect on Apple. Recently, Canaccord Genuity analyst T. Michael Walkley noted that even if the court bans iPhone imports, Apple will just start paying licensing fees to Qualcomm and at the same time continue to battle for lower royalty payments.

“Therefore, we do not believe the Qualcomm ITC complaint creates risk to our 2018 Apple estimates,” the analyst said.

Wells Fargo analyst Maynard Um stated recently that the ongoing legal battles could create volatility in the stock prices of both companies. However, Apple investors are currently more focused on the upcoming iPhone 8.

On Monday, Apple shares closed up 0.35% at $149.56. Year to date, the stock is up more than 29%, while in the last year, it is up more than 51%. Qualcomm shares were down 0.62% on Monday.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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