Shares of Qualcomm- the chip-making company – were down around 2.3% at $55.40 on Wednesday. According to reports, the chip making company saw a fall in the third quarter profit as well when contract manufacturers of the tech giant withheld royalties that they had to pay to Qualcomm.
Qualcomm’s licensing business sees a decline
Earlier this year, the Silicon Valley giant sued the chip maker, accusing the company of overcharging for chips. The tech giant had even asked its contract manufacturers to withhold license payments from the chip making company while the dispute continued. The Chief Executive Officer, Steve Mollenkopf, said in a statement, “We believe that we hold the high ground with regard to the dispute with Apple.”
The reports by Reuters note “Qualcomm forecast adjusted profit of 75 cents to 85 cents per share and revenue of $5.4 billion to 6.2 billion for the current quarter.” The chip maker said that the forecast excluded the licensing revenue related to the sale of Apple products by contract manufacturers and other unnamed licensee in dispute.
According to Thomson Reuters I/B/E/S, analysts were anticipating a revenue of $5.48 billion and an adjusted profit of over 90 cents per share. Dave Heger, the Edward Jones analyst said, “(Forecast) is pretty strong on the revenue front… the chip business is looking good especially in China, where it is getting pretty good traction with Chinese manufacturers.” The revenue from its Qualcomm CDMA Technologies (QCT) unit that includes its chip business increased 5% to $4.05 billion. Revenue from the licensing business of Qualcomm, however, dropped 42.5% to $1.17 billion.
Qualcomm keeps the sales’ metrics a mystery
Qualcomm – the chip making giant – did not provide any metrics related to device sales due to the dispute with the contract manufacturers of the Silicon Valley giant and the other licensee. According to reports of news site Reuters, in the third quarter that ended June 25, the net income of the chipmaker declined to $866 million or 58 cents per share from $1.44 billion, or 97 cents per share, a year earlier
In addition to this, the revenue declined 11.1% to $5.4 billion. The chip making giant earned 83 cents per share, excluding items whereas the analysts were anticipating a profit of 81 cents per share.
The chip making company – Qualcomm – said while talking about the contract manufacturers, “We have a contract with each of these manufacturers and they have all been paying us consistently for 10 years.” Don Rosenberg, Qualcomm’s general counsel, said “At the end of the day, it all boils down to this company, Apple, not wanting to pay for the valuable intellectual property that we provide to them and the rest of the industry.”