Don't Get Fooled By Qualcomm


  • Qualcomm investors had a rough time since last year. The stock has collapsed from a peak of $68 whilst the Semiconductor index (SOX) appreciated over 40%.
  • Moreover, Qualcomm investors had to cope with a barrage of worrisome news. A dispute with Apple resulted in a licensee withholding royalty payments until further notice.
  • On top of all this, doubts about the shareholder support and regulatory approvals for the NXP takeover become more vocal.
  • Meanwhile Apple has its investors wonder how the tensions will impact new product development and future margins on the the back of different ‘more fair’ cost structures.
  • What to make of this tense situation? What would the intelligent investor do? Sell and come back when the murky waters are clear again, sit it out and cash on dividends or even buy the dip?

As a Qualcomm (NASDAQ:QCOM) investor myself, I have been struggling to get my head around all big events, new product introductions and the latest earnings report. Has QCOM now become a ‘don’t touch with a ten-foot pole stock’? Big Tech competitors Intel (INTC) and Samsung (OTCPK:SSNLF) joined Apple in its strong-arm play to crack QCOM’s pricing structure of its licensing division (QTL). On top of all this, a licensee stopped paying royalties last quarter, and doubts about the likelihood of the NXP (NASDAQ:NASDAQ:NXPI) takeover became more vocal. What would the intelligent investor do?

Let me be clear, I don’t claim to know how these very complex events will turn out, both timing and outcome are highly uncertain. What I will try to do is to evaluate the facts and impact from a value investor’s perspective, with an investment horizon of 5+ years.

Qualcomm snapdragon.jpg


For this article I will assume readers already have a certain background on QCOM and the running lawsuits. If not, you can read up on it in my QCOM article written in April here and various articles here on SA about the latest developments. On a very high level, what is happening now is that Apple is making its contract manufacturers withhold payments for QCOM intellectual property (IP). This dispute attracted the attention of other clients and competitors, amongst others Intel and Samsung who seized the momentum to join the fight. Their main claim is that QCOM uses its dominant position in the mobile processor industry to squeeze others out and force customers to accept unfair terms.

Without QCOM IP smartphones would be nowhere near the fast, communicative, and data heavy devices they are nowadays. The QCOM IP is at the core of what makes a smartphone and directly enables Apple to charge high end prices for its iPhones. QCOM significantly

This article was written by

Inspired by fellow SA contributors, especially other young dividend investors, I decided to start contributing to SA. I have a background as PE investor for an international bank and an enthousiasm for Tech companies. In my portfolio I try to find a balance between the dividend growth companies and the sectors I prefer (e.g. Health, Tech and sustainability). In general my investment style is conservative and focused on the long term. Based in the Netherlands I have a different perspective on USD and EUR risks.

Disclosure: I am/we are long QCOM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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