Qualcomm Takes Q3 Pummeling From Apple
Qualcomm has blamed a succession of legal challenges for sharp falls in sales and profits during the April-to-June (third) quarter while insisting that its underlying business continues to perform strongly.
The chipmaker saw revenues fall by 11%, in GAAP terms, to around $5.4 billion, while net income tumbled 40% to just $900 million, compared with the year-earlier period.
The chief culprit was the ongoing dispute with Apple, which, says Qualcomm, has goaded its contract manufacturers into withholding royalty payments to Qualcomm.
Apple Inc. (Nasdaq: AAPL) sued Qualcomm Inc. (Nasdaq: QCOM) for $1 billion at the start of the year, claiming it had been overcharged by the chipmaker for years. Qualcomm, in turn, has accused Apple of trying to upset its agreements with licensees. It is also now seeking a ban on the import of some iPhones into the US, arguing that Apple has infringed six patents that cover various high-performance features in the smartphones. (See Qualcomm Blasts Apple for Disrupting Deals in Legal Dispute and Qualcomm Seeks Ban on iPhone Imports.)
But separate disputes with Canada's BlackBerry and the Korea Free Trade Commission (KFTC) also tore into its results, said the chipmaker in its earnings statement.
It blamed a fall in operating cash flow partly on payments of $940 million to BlackBerry and $927 million to the KFTC, and said actions taken by Apple's contract manufacturers and another unnamed licensee had also had an impact at this level.
Operating cash flow was nearly wiped out entirely in the third quarter, dropping from $1.8 billion a year earlier to just $100 million.
The chipmaker, whose technology is used in many of the world's most popular smartphones, took the rare step of withholding data on device shipments and average selling prices as a result of the litigation.
"As a result of the recent actions taken by Apple's contract manufacturers and the other licensee in dispute, we currently do not believe total reported device sales and related estimated ranges of device shipment and average selling price are meaningful in measuring our QTL business and therefore we are not providing such metrics for the fiscal third quarter," it said in its report.
Unsurprisingly, a breakdown of results shows that Qualcomm's licensing business bore the brunt of the damage caused by litigation. Revenues at that division fell 42%, to about $1.2 billion, compared with the year-earlier quarter.
The semiconductor unit, meanwhile, reported a 5% year-on-year increase in sales, to about $4.1 billion, thanks to rising demand across a number of vertical markets.
"Our products and technologies continue to enable the global smartphone industry, and we are expanding into many exciting new product categories, including automotive, mobile computing, networking and IoT," said Steve Mollenkopf, Qualcomm's CEO, in a statement.
Qualcomm expects earnings per share to fall by 34% to 41% in the coming fourth quarter, to between $0.75 and $0.85. Revenues are expected to be "flat" at best and to fall by 13% at worst in comparison with the year-earlier period, when the company reported sales of about $6.2 billion.
Qualcomm's share price was trading down more than 4% on the Nasdaq at the time of publication.
— Iain Morris, , News Editor, Light Reading