Apple CEO Tim Cook: We Feel Good About Resolution With Qualcomm

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During today's earnings call covering the second fiscal quarter of 2019 (first calendar quarter), Apple CEO Tim Cook was asked about Apple's settlement with Qualcomm.

While Cook declined to provide color on how this will affect Apple's development plans in the future, he did say that Apple is satisfied with the resolution.

We're glad to put the litigation behind us and all the litigation around the world has been dismissed and settled. We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution.
Apple and Qualcomm reached a settlement in mid-April and agreed to drop all litigation in multiple countries around the world. Apple made a one-time payment to Qualcomm and inked a six-year licensing agreement to use Qualcomm's patented technologies.

The settlement also included a chipset supply agreement, and Qualcomm is expected to provide the 5G chips that Apple will need to introduce 5G connectivity in its 2020 iPhones.

While rumors have suggested Apple is going to add 5G in 2020, Apple itself has not confirmed those plans and Cook did not provide details on Apple's 5G timeline when asked. He did, however, say that Apple aims to get new technologies into products as soon as it can.
We look at a lot of things on the different technologies and try to look at and select the right time that things come together and get those into products as soon as we can.
After Apple and Qualcomm announced their settlement agreement, Intel said that it was dropping out of the smartphone modem chip market entirely, with no plans to manufacture 5G chips.

Article Link: Apple CEO Tim Cook: We Feel Good About Resolution With Qualcomm
 

AngerDanger

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Dec 9, 2008
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We're glad to put the litigation behind us and all the litigation around the world has been dismissed and settled. We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution.
Geez, Cook, calm down! No need to get overexcited there; you very nearly expressed emotion. :eek:
 
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Carnegie

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If Qualcomm's initial estimate for the incremental EPS effect of the agreement is more or less correct, then Apple got a favorable combination of royalty rate and chip supply terms. (The back of the envelope calculations aren't hard to do.) Of course, whatever the terms were they were also acceptable to Qualcomm. But, by the time of the settlement, Qualcomm had already had to accept that it wouldn't be able to impose the kinds of terms it had previously been able to impose.

The royalty rate aside, Apple was able to get what it had wanted - a direct licensing deal and a long-term chip supply agreement. Both of those things were important. Further, it's most likely that Apple didn't have to agree to a number of the onerous terms which it had previously had to agree to. So I'm not sure how this agreement can be seen as anything but a win for Apple.

That doesn't mean it was a loss for Qualcomm though. It's certainly a positive development for Qualcomm because Qualcomm was suffering quite a bit financially from the situation as it was. Any settlement that didn't amount to near complete capitulation (from Qualcomm) should have, I think, been considered a win for Qualcomm. (And I don't think this settlement amounts to a near complete capitulation for Qualcomm, though it surely gave considerable ground). It very much needed this dispute resolved. It's just that there's a new reality now for Qualcomm when it comes to how it can operate. That's in part due to the dispute with Apple (and other industry participants) and in part due to regulatory actions.
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They both won. We'll lose some 49$ extra to the next generation iPhone.
Are you suggesting that iPhone prices will go up as a result of the Qualcomm - Apple settlement?

If so, why would that happen? If Qualcomm's estimate is close to accurate, Apple will be paying less (per device) in royalties (to Qualcomm) than it would have been before it started withholding them and filed suit.
 

paul4339

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I see it as a positive for both companies... Apple was paying (2011) $7. Qcom wanted to increase $18-19.
They settled on (2019) $8-9, I believe.

Apple got rates similar to 2011.
Qcom got most of it's money that Apple was holding hostage and got a 6-year agreement AND as a side benefit sunk a competitor (Intel). And by resolving, resulted in a hefty stock bump for shareholders.

I think that's better than dragging it out for a few more years for both sides.
 

Carnegie

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pretty much: "We feel like we were going to lose the trial"
On what do you base the idea that Apple was going to lose the trial? (I assume you're referring to the one which Judge Curiel was hearing.)

Had you been paying attention to the rulings in that case? On the whole, it was setting up to Apple's advantage.
 

BootsWalking

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"The issues that we have with Qualcomm is that they have a policy of no license, no chips. This is, in our view, illegal."

-Tim Cook, January 2019

"We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution."

-Tim Cook, April 2019
 

CWallace

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Pretty much what Carnegie said.

Apple gets access to Qualcomm 5G modems for the 2020 iPhone and beyond until they are ready to use their own modem.
Apple gets the Qualcomm patents they need to develop their own modem to replace those Qualcomm modems at some future point without worry of legal action against them.
Apple gets lower royalty rates going forward (if not retroactively on what they owed, as well).

Qualcomm gets a large cash infusion (the royalties Apple and partners have been holding back)
Qualcomm gets steady cash infusions going forward from Apple purchasing their modems (likely exclusively from the 2020 model) and licensing fees/royalties.
Qualcomm doesn't need to worry about Apple giving possibly detrimental testimony in their case with the FTC.
 

coolfactor

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"They found our internal memos indicating we were trying to mess them up for leverage. We got caught with our hand in the cookie jar and bent over because we were going to lose". IMHO
My understanding is that Qualcomm was insisting on unreasonable terms outside of just selling their goods. They were trying to rape Apple, and Apple stood up and said NO.

I have a feeling there's definitely a gameplan that we don't have the full details on. Why else would the head of Intel 5G modem development have joined Apple at the same time? Apple may have a licensing agreement with Qualcomm, but maybe they are not required to buy a minimum number of modems? What if this 6-year agreement will see only a year of modem sales when Apple comes out with their own? They are licensing the technology, so they don't necessarily need to use Qualcomm-built modems.
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"The issues that we have with Qualcomm is that they have a policy of no license, no chips. This is, in our view, illegal."

-Tim Cook, January 2019

"We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution."

-Tim Cook, April 2019
It's likely not as black-and-white as you are portraying it.
 

deckard666

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"The issues that we have with Qualcomm is that they have a policy of no license, no chips. This is, in our view, illegal."

-Tim Cook, January 2019

"We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution."

-Tim Cook, April 2019
Funny how a little time can change your opinion -

March 2014, Trump tweeted, “Autism way up - I believe in vaccinations but not massive, all at once, shots. Too much for small child to handle. Govt. should stop NOW!”

This week - “They have to get the shots. The vaccinations are so important.”

Although obviously that was a slightly longer period for Trump - perhaps it took him a while to read all the evidence to support vaccinations....
 
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JPack

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"The issues that we have with Qualcomm is that they have a policy of no license, no chips. This is, in our view, illegal."

-Tim Cook, January 2019

"We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution."

-Tim Cook, April 2019
Pretty much this. Tim Cook was idealistic and vocal but when it came down to it, Tim Cook caved.

If Apple was against the so-called Qualcomm monopoly and everything it stood for, a $900B company wouldn’t need back down.
 
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BaltimoreMediaBlog

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Tim Cook didn't say much, but he reaffirmed that the iPhone X series and future phones are the best selling Apple phones ever and that there are still no FM chips nor will there be in any iPhones in the future.

Anyone who says otherwise will be leaving the company, well except for Qualcomm. :D
 

Carnegie

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Well they did lose as I believe they’ve ended up paying Qualcomm more then before possibly? Strange business tactic..
There was considerably more at issue than the royalty rate for Qualcomm’s IP.

Who knows what the jury would have determined with regard to the various claims the parties made. But Apple had, in pre-trial motions, mostly been winning. The trial was setting up more as it desired and less as Qualcomm desired. Though, Qualcomm had successfully managed to avoid having the validity, exhaustion, and infringement of some particular patents considered by agreeing to never sue Apple or the contract manufacturers for infringement of those patents.

That said, one of the aspects of this case (i.e. the consolidated case which Judge Curiel was presiding over) involved Qualcomm seeking to have its licensing agreements with the contract manufacturers enforced. What Apple agreed to pay is, if Qualcomm’s estimate for the settlement’s effect on EPS is correct, considerably less than it would have had to pay, for less IP, under those existing contracts.
 
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BootsWalking

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My understanding is that Qualcomm was insisting on unreasonable terms outside of just selling their goods. They were trying to rape Apple, and Apple stood up and said NO.

I have a feeling there's definitely a gameplan that we don't have the full details on. Why else would the head of Intel 5G modem development have joined Apple at the same time? Apple may have a licensing agreement with Qualcomm, but maybe they are not required to buy a minimum number of modems? What if this 6-year agreement will see only a year of modem sales when Apple comes out with their own? They are licensing the technology, so they don't necessarily need to use Qualcomm-built modems.
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It's likely not as black-and-white as you are portraying it.
You're absolutely right, Apple stood up and said NO...but then got sat right back down by when they realized Qualcomm had all the leverage and Apple had none. That little exercise in "bravery" cost them billions of dollars.
 
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Carnegie

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You're absolutely right, Apple stood up and said NO...but then got sat right back down by when they realized Qualcomm had all the leverage and Apple had none. That little exercise in "bravery" cost them billions of dollars.
How did it cost them billions of dollars? Apple was always going to have to pay royalties, both for the previous years (in arrears) and going forward. As it is, it will be paying considerably less than Qualcomm wants (for an all inclusive 5G license) and less than it would have had to pay (through its contract manufacturers under existing agreements) had it not started to withhold payments and filed suit.

Also, what makes you think Apple ended up saying yes to the kinds of things it had “stood up and said NO” to? Do you think Apple agreed to all of the onerous terms which Qualcomm had previously imposed?