After a couple of minor setbacks in its global legal battle with Apple, Qualcomm warned investors to hunker down for a lengthy fight.
Contrary to some hints this summer about a possible out-of-court settlement, Qualcomm executives on Wednesday emphasized just how long it may take to resolve the various lawsuits and investigations in the United States, China, Germany, and elsewhere.
Apple (AAPL) started the legal war in January when it sued Qualcomm for allegedly charging excessive royalties to license wireless technologies it uses in the iPhone and iPad. But the dispute has widened, and Apple and its suppliers stopped paying billions of dollars annually in royalties starting in April.
“There are a lot of levers between the companies to figure out things,” Qualcomm CEO Steve Mollenkopf said on a call with analysts after his company’s latest quarterly results on Wednesday. “I just think we’re not at a point where we’re announcing anything different and I think we want to be upfront that this could take some time to resolve.”
General counsel Don Rosenberg added, “It’s important to keep in mind that litigation of this size and magnitude takes a while and you can’t focus on any particular event in the short term.”
Back in July, Mollenkopf was hinting at a settlement. But the new spin comes after Qualcomm lost a motion in federal court in September that would have required Apple’s manufacturing partners to continue paying royalties. Qualcomm also lost a bid to have an order from the Korean Fair Trade Commission against it temporarily set aside during an appeals process.
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The results reported on Wednesday, covering Qualcomm’s fiscal fourth quarter of 2017, showed just how deeply the battles are cutting into sales and profits. With Apple and its suppliers not paying royalties plus other legal settlements Qualcomm (QCOMM) made, revenue slid 5% to $5.9 billion and profits almost disappeared, declining 89% to $168 million. The drop was slightly less than Wall Street had feared thanks to booming sales in China.
Qualcomm’s shares, which have lost 18% so far this year, gained about 1% in after-hours trading.
Mollenkopf also made some puzzling assertions during the call with analysts. The Wall Street Journal broke a story this week that Apple was considering cutting off even more business from Qualcomm by entirely dropping Qualcomm’s wireless modem chips from the iPhone and iPad. The move came because Qualcomm wasn’t giving Apple access to software it needed to test the modems in prototype devices.
But Mollenkopf argued that Qualcomm was trying to keep the legal dispute over intellectual property rights separate from the modem sales to Apple, and that it was doing everything it could to expand those sales. That seemed at odds with the failure to provide testing software.
“I think it’s also important for investors to understand we really try to compartmentalize our engagement with Apple,” the CEO said, distinguishing between “product engagement” and “a dispute over the price of IP.”
“We’re working very hard on the product side to make sure that we continue to be a good supplier and a good showcase for our innovation products,” he said.
