Apples’ former business partner has now become its bitter opponent. Its’ none other than Qualcomm. Reason behind this rivalry is that Apple refused to pay royalties to chip maker Qualcomm for its some of the features in iPhone.
This rivalry has surly blown Qualcomm; depending upon license fee for a large portion of its revenue. Apples’ decision to hold back iPhone royalties will charge Qualcomm up to $500 million in the current quarter alone.
“This is getting ugly, the level of hostility just went up another notch,” said technology analyst Patrick Moorhead of Moor Insights and Strategy. Moorhead added that “As a revenge Qualcomm will seek court orders to stop iPhone sale until Apple pay all the royalties”
Although till now Qualcomm hasn’t endangered to reach to that extreme level. Company’s top lawyer made it clear on Friday that the world’s most reputable technology company is girding for stern fight with its Cupertino, California based Apple.
“We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry,” said Don Rosenberg, Qualcomm’s general counsel.
The other side of the story; Apple admits that it has to pay some royalty over its iPhone sale to Qualcomm. The reason of not paying the royalty fee is; Apple believes that Qualcomm is mistreating its power to charge for royalties on features that aren’t cover by its patents.
Qualcomm has in return held Apple responsible for interfering in deals with iPhone suppliers and also breaking the contract to lower its license fee. After this blame, Apple sued Qualcomm in January 2017 in federal complaint. Qualcomm totally denied the allegations and responded with its own litigations against Apple this April.
Apples’ issued a statement saying, they will not pay any further royalty to Qualcomm until the court determines the amount to pay. This legal process my take several years.
“As we’ve said before, Qualcomm’s demands are unreasonable and they have been charging higher rates based on our innovation, not their own,” Apple said.
Apple’s suspension of royalty payments marks “the latest step in Apple’s global attack on Qualcomm,” said Don Rosenberg, Qualcomm’s general counsel.
Apple is not alone in this battle with Qualcomm. The U.S. Federal Trade Commission also has filed a litigation charging that Qualcomm has been imposing unfair licensing terms on manufacturers. With the loss of iPhone royalty payments, Qualcomm now expects its revenue for its April-June quarter to range from $4.8 billion and $5.6 billion, down from its previous forecast of $5.3 billion to $6.1 billion.
Qualcomm now expects its earnings for the period to range from 75 to 85 cents per share. That’s down from an earlier projection of 90 cents to $1.15 per share. Investors shook off the shock of Qualcomm’s lowered guidance after initially driving down the company’s stock. Its stock rose 53 cents, or 1 percent, to $53.74 on Friday. The stock has fallen by about 15 percent since Apple filed its litigation.