Qualcomm Got $4.5 Billion From Apple Settlement According to Earnings Release

[MacRumors]

Qualcomm today announced its quarterly earnings results and shared details on the amount of revenue that it will be receiving in the coming quarter as part of its recent settlement with Apple.

As pointed out by Axios, Qualcomm will record $4.5 to $4.7 billion in revenue from the Apple settlement, which includes a "cash payment from Apple and the release of related liabilities."

Apple and Qualcomm announced a settlement in mid-April, dropping all lawsuits and litigation against one another. Apple at the time said the settlement included a payment from Apple to Qualcomm, but both companies declined to provide specific details on just how much Apple paid out in backdated royalties.

An analyst estimate put the number at around $5 billion to $6 billion, but it appears Apple didn't shell out quite that much.

Apple's deal with Qualcomm also includes a direct six year licensing agreement and a multiyear chipset supply agreement, which will see Qualcomm supplying modem chips to Apple for future devices.

Apple appears to have had no alternative but to settle with Qualcomm as it needed 5G modem chips for its 2020 iPhone lineup. Apple originally planned to use Intel chips, but rumors suggested Intel wasn't meeting development goals, leading to tension between Apple and Intel.

Just hours after Apple and Qualcomm announced a settlement deal, Intel said that it was exiting the 5G smartphone modem business and would not be making 5G smartphone chips at all, a decision the company later said was based on Apple and Qualcomm's settlement.

Yesterday, Apple CEO Tim Cook said that Apple "feels good" about the resolution with Qualcomm. "We're glad to put the litigation behind us and all the litigation around the world has been dismissed and settled," said Cook. "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."

Article Link: Qualcomm Got $4.5 Billion From Apple Settlement According to Earnings Release

 

[Baymowe335]

So, nothing for AAPL, particularly if they get a long term deal they find favorable.

Remember kids, the $4.5B is likely just royalty payments Apple stopped making during litigation and they are paying QCOM to make them whole on previously agreed terms. This isn't like a $4.5B bonus for QCOM.

So don't start coming in here saying Apple lost and all that. No one knows the terms.

QCOM -5% after earnings.

 

[twocents]

A Billion after Notre Dame fire, 1.2 Billion with Endgame, and now 4.5 Billion for Apple to settle with QC. Funny how that much money is getting tossed around so quickly

 

[macfacts]

So, nothing for AAPL, particularly if they get a long term deal they find favorable.

Remember kids, the $4.5B is likely just royalty payments Apple stopped making during litigation and they are paying QCOM to make them whole on previously agreed terms. This isn't like a $4.5B bonus for QCOM.

So don't start coming in here saying Apple lost and all that. No one knows the terms.

QCOM -5% after earnings.

More confirmation apple was lying about being overcharged.

 

[Baymowe335]

More confirmation apple was lying about being overcharged.

No, it's not proof of that at all.

 

[User 6502]

So don't start coming in here saying Apple lost and all that. No one knows the terms.

QCOM -5% after earnings.

No one knows for sure, but everyone can make educated guesses, and most people guess Apple lost, and they are probably right.

 

[rafark]

Glad apple was forced to pay its bills.

 

[testcard]

“A billion here, a billion there, pretty soon you're talking real money.”

 

[I7guy]

Glad apple was forced to pay its bills.

They weren’t forced. By virtue of the settlement, which could have resulted in a protracted legal battle had they not settled, they (Apple) settled and that means voluntarily handing over the money.

 

[Baymowe335]

No one knows for sure, but everyone can make educated guesses, and most people guess Apple lost, and they are probably right.

Without knowing the terms of the future agreement, that assumption cannot be made.

 

[Gasu E.]

No one knows for sure, but everyone can make educated guesses, and most people guess Apple lost, and they are probably right.

"Apple lost"-- what does that mean to you, exactly?

 

[pike908]

More confirmation apple was lying about being overcharged.

Who knows for sure what the original bill was? Perhaps Apple had to pay 100% of what they owed. Perhaps Qualcomm settled for less...

 

[cmaier]

Isn't that half the amount that was previously reported?

 

[JPack]

Sounds like UBS analyst Timothy Arcuri was right on the mark when he said Apple paid Qualcomm between $5 billion and $6 billion to settle the litigation. Qualcomm owed Apple $1B so Apple is writing a check for $4.5B.

He also suggested Apple paid between $8 and $9 in patent royalties per device, a huge win for Qualcomm given the growth in LTE Watch and iPad.

 

[rafark]

They weren’t forced. By virtue of the settlement, which could have resulted in a protracted legal battle had they not settled, they (Apple) settled and that means voluntarily handing over the money.

"voluntarily" by definition, but forced in practice as they needed to keep doing business with Qualcomm.

 

[Baymowe335]

Sounds like UBS analyst Timothy Arcuri was right on the mark when he said Apple paid Qualcomm between $5 billion and $6 billion to settle the litigation. Qualcomm owed Apple $1B so Apple is writing a check for $4.5B.

He also suggested Apple paid between $8 and $9 in patent royalties per device, a huge win for Qualcomm given the growth in LTE Watch and iPad.

It's not a win if QCOM wanted $15/iPhone and Apple stopped royalty payments already agreed from before. How much of the $4.5B was stopped royalty payments they owed anyway?

And how much did Apple save in their new terms versus what QCOM wanted over the next 5 years?

Yeah, you don't know.

 

[I7guy]

"voluntarily" by definition, but forced in practice as they needed to keep doing business with Qualcomm.

And Qualcomm needed the money.

 

[JetTester]

A drop in the bucket for Apple, and it gets them access to quality modem chips, which they weren't able to get from Intel. Sounds like winners all around, except Intel, who didn't seem to really want to be in the business anyway.

 

[Carnegie]

That's in line with what has been estimated and what we might expect based on Qualcomm's earlier estimate for the incremental effects on (future) EPS.

That would be $4.5 to $4.7 billion in royalties for a period of time in which Apple would have sold around 460 million iPhones plus some iPads and Apple Watches - something like a half billion total cellular devices. That would also compare to the $8 billion plus that Apple would have owed under the contract manufacturers' existing agreements.

It's worth noting that Apple's guidance for Q3 doesn't seem to reflect a substantial charge for the one time payment. If what Apple ended up paying (for back royalties) was substantially above what it had expected to end up paying (and what it had been accounting for in previous financial statements), it would have to account for that somehow. And that would be incorporated in its guidance. It would be noticeable in, e.g., its gross margin estimate.

 

[Intellectua1]

That's Four Thousand and Five Hundred
Million Dollars. Money none of us can even imagine!

 

[rafark]

And Qualcomm needed the money.

Of course it did. Qualcomm gave apple the products it needed and in return apple broke their agreement and payed nothing. That's called a scam and there's no way to defend apple in this.

 

[69Mustang]

It's not a win if QCOM wanted $15/iPhone and Apple stopped royalty payments already agreed from before. How much of the $4.5B was stopped royalty payments they owed anyway?

And how much did Apple save in their new terms versus what QCOM wanted over the next 5 years?

Yeah, you don't know.

How can it not be a win? They presumably got their overdue royalty payments, an increase in the royalty rate from $7.50 to between $8 to $9 per device, and another long term commitment. Supposedly wanting $15 and getting ~$8 or so can't be considered losing... especially when they were getting $0 in overdue payments, $0 dollars per device in current and future payments, and no commitment for 5G modems. In no version of this tale did Qualcomm not win. That's not to say Apple lost, because they didn't. But you can't honestly put forth an argument where Qualcomm didn't win.

 

[Seoras]

The only losers in this were the lawyers on both sides who won't be getting paid to fight any more and Intel who are looking more and more pathetic each year.
From yesterdays news: "Apple believes its Mac revenue would have increased this quarter, but was down 5% due to processor constraints"
Can't be long now until Apple is an ARM only house.

 

[Carnegie]

So, nothing for AAPL, particularly if they get a long term deal they find favorable.

Remember kids, the $4.5B is likely just royalty payments Apple stopped making during litigation and they are paying QCOM to make them whole on previously agreed terms. This isn't like a $4.5B bonus for QCOM.

So don't start coming in here saying Apple lost and all that. No one knows the terms.

QCOM -5% after earnings.

The payment would be for 9 quarters worth of royalties - all of calendar years 2017 and 2018, and the first calendar quarter of 2019.

Or, another way of looking at it... the payment would be for 10 quarters worth of royalties (including the last calendar quarter of 2016, when Apple withheld part of the royalty payments to offset the almost a billion dollars in rebates which Qualcomm had withheld). But then we'd have to account for the billion or so dollars which Qualcomm would have owed Apple for those withheld rebates. Since the amount Apple withheld from royalty payments for the last calendar quarter of 2016 is more or less equal to what Qualcomm withheld in rebates, that quarter is a wash. So we're back to the same thing: The payment is, meaningfully, for 9 quarters worth of royalties. It amounts to something less than $10 per device and is significantly less than Apple would have owed under the contract manufacturers' existing agreements.
[doublepost=1556745432][/doublepost]

Of course it did. Qualcomm gave apple the products it needed and in return apple broke their agreement and payed nothing. That's called a scam and there's no way to defend apple in this.

What agreement did Apple break?

Qualcomm is the one that withheld royalty payments which were due to Apple under the then-in-effect agreement between the parties (i.e. the BCPA). Apple didn't sue Qualcomm or withhold royalty payments (other than to offset the withheld rebates) until after the BCPA had expired.

 

[tooltalk]

"Apple lost"-- what does that mean to you, exactly?

Apple had claimed previously :

a) by patent exhaustion, Apple (or its CMs) owed no patent royalty
b) by SSPPU and FRAND, QCOM's royalty shouldn't exceed $1.50 per device at max
c) CM's old contracts with QCOM were invalid because QCOM's breach of FRAND
d) $1B rebates withheld by QCOM for breaching BCPA

Apple won (d), but lost (a), (b), (c). This effectively also ends Apple's 10-year campaign against wireless SEP holders, though the FTC case is still on.