Apple Dispute Hits Qualcomm in the Purse as 2Q Net Income Drops 40 Percent

Qualcomm’s patent dispute with popular smartphone vendor Apple is hitting the company where it hurts: in the wallet. The chipmaker on Wednesday reported a 40 percent plunge in net income, which dropped below the $1 billion mark.

Though Qualcomm CEO Steve Mollenkopf said he believes the company holds the “high ground” in its spat with Apple, that didn’t translate well to the balance sheet. Revenues of $5.4 billion were down 11 percent year over year, while operating income dropped off 51 percent to $800 million, and net income slid from $1.4 billion in 2016 to $900 million in the second calendar quarter 2017 (the company’s third fiscal period). Those figures were actually improved from the previous quarter, when revenue came in at $5 billion and net income stood at $700 million.

The major declines came from Qualcomm’s licensing business, where revenues dropped 42 percent year over year and 48 percent sequentially to $1.2 billion. The Qualcomm Technologies segment actually increased its revenues by 5 percent to $4 billion despite a 7 percent decline year over year in MSM chip shipments.

During Wednesday’s call, Qualcomm President Derek Aberle once again accused Apple of sabotaging its licensing agreements with manufacturers.

“It is clear that Apple is controlling all of the contract manufacturers’ statement and actions in the litigation. If Apple hadn’t interfered with the licenses and instructed the contract manufacturers to take these actions, the contract manufacturers would not be contesting the licenses now,” he said. “It is important to remember that in most cases our license agreements were negotiated and entered into with the contract manufacturers before Apple ever entered the smartphone market. And then Apple decided to rely on them for a decade, before now trying to disrupt them.”

Apple battle notwithstanding, though, Mollenkopf said the company’s licensing business had a long, bright future ahead of it.

“Despite the near-term financial impact to our business by the actions of a small number of powerful industry players, the long-term outlook for our licensing business continues to remain strong,” he said during Wednesday’s earnings call. “With more than 300 freely negotiated global license agreements and a technology portfolio that is fundamental to the performance of wireless and mobile computing devices today and for many years to come. The licensing business will continue to be a significant revenue and profitability generator for the company longer term.”

Aberle noted a hearing in the case with Apple is expected to be held in mid-August.

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