Chipset major Qualcomm Technologies has posted revenue of $6.1 billion (+1 percent) and net loss of $6 billion in its fiscal first quarter ended December 24, 2017.
The performance of Qualcomm was under pressure in the last two quarters due to its “patent fight” with US-based device maker Apple and Apple suppliers and the penalties it faced in several countries.
The company’s CDMA technologies unit, its largest business, achieved 13 percent increase in revenue to $4.65 billion in the first quarter. But licensing revenue dropped 28 percent to $1.30 billion, due to its dispute with Apple.
Apple, the second largest phone maker in the world, sued Qualcomm last January, accusing it of overcharging for chips and refusing to pay some $1 billion in promised rebates.
“We remain open to finding a path to resolution with Apple,” Qualcomm chief executive officer Steve Mollenkopf said on a call with analysts.
Qualcomm, the world’s biggest supplier of mobile phone chips, said the recent financial results were negatively impacted by continued dispute with Apple and its contract manufacturers, who are Qualcomm licensees, as well as the previously disclosed dispute with another licensee.
Reuters reported that Qualcomm aimed to show shareholders that its licensing practices still have a future after having come under scrutiny from antitrust regulators around the world as well as from major customer Apple.
The disputes over the practices have even weakened Qualcomm’s financials enough to make it the target of a $103 billion hostile takeover bid from Broadcom.
Qualcomm said it did not record any QTL revenues in the first quarter or fourth quarter of fiscal 2017 for royalties due on sales of Apple’s or the other licensee’s products.
The first quarter of fiscal 2018 results included $6 billion charge relating to the enactment of the Tax Cuts and Jobs Act in the United States (U.S.) and $1.2 billion charge for the fine imposed by European Commission (EC).
The first quarter of fiscal 2017 results included $868 million charge for the fine imposed by the Korea Fair Trade Commission (KFTC). The fourth quarter of fiscal 2017 results included $778 million charge for the fine imposed by the Taiwan Fair Trade Commission (TFTC).
On January 16, 2018, Qualcomm announced a cost reduction plan to achieve margin targets. Qualcomm aims to implement reductions across businesses to reduce annual costs by $1 billion.
Deal with Samsung
Qualcomm has renewed its license agreement with Samsung Electronics, the world’s No. 1 mobile handset maker. The tech deal is happening at a time when Qualcomm is fighting against Apple, the major rival of Samsung, in several courts.
Samsung and Qualcomm said they would expand their efforts to collaborate around 5G, the next generation of mobile data networks.
“The announcement underscores the importance of our strategic relationship with Samsung in driving core mobile technology into many different segments,” said Cristiano Amon, president of Qualcomm.
Qualcomm has also expanded its patent cross-license deal with Samsung covering mobile devices and infrastructure equipment. As part of the agreement, Samsung will withdraw its interventions in Qualcomm’s appeal of the KFTC decision in the Seoul High Court.
Reuters report said the tech deal to end hostilities stands out because Qualcomm’s at times contentious dealings with its customers have become a focal point in Broadcom’s takeover effort. Broadcom’s leaders argue they can boost Qualcomm’s value by taking over the San Diego-based company and resolving some of its disputes with customers.
Qualcomm has two business lines, one that sells chips and another that charges licensing fees to handset makers like Apple and Samsung based on a cut of the selling price of their phones.
The device licensing has been the focus of many of Qualcomm’s regulatory and customer disputes, with Apple calling it an unjust “tax.” Broadcom’s leaders have hinted they might modify it.