Qualcomm Wireless Leadership Wins Out

Apr. 17, 2019 10:25 AM ETQUALCOMM Incorporated (QCOM)AAPL, INTC116 Comments


  • Qualcomm settles long-lasting patent disputes with Apple.
  • The new deal will immediately boost EPS estimates.
  • The stock remains cheap with reasonable $7 EPS targets and a $70 stock price.

In no big surprise to investors following our investment research on Qualcomm (NASDAQ:QCOM), the company was able to obtain a settlement with Apple (AAPL) over their wide disputes on patent royalties. The wireless technology giant had already garnered settlements in China and South Korea along with recent admission from Japanese regulators that Qualcomm was not a monopoly. Along with constant signs that Apple was struggling to obtain a viable 5G modem by 2020, the expected outcome was a settlement that would send the stock soaring. Outside of unexpected financial terms, Qualcomm heads higher.

Qualcomm 5G logoImage Source: Qualcomm website


During the trading day on Tuesday, news broke that Qualcomm and Apple had agreed to settle their long-going royalty dispute. The companies were awaiting the outcome of an FTC suit and had just started a jury trial in San Diego so the dispute was reaching a boiling point.

The timing of the settlement isn't a surprise as most data points favored Qualcomm winning these suits. The financial details of the settlement are limited, but Qualcomm provided investors with this slide on the license agreement.

Source: Qualcomm/Apple patent license presentation

Some of the key terms were the deal includes a six-year term with Apple paying royalties to Qualcomm effective April 1. The deal includes a one-time payment from Apple to Qualcomm.

In addition, the companies signed a multi-year chipset supply agreement suggesting Apple wasn't happy with the chips from Intel (INTC) recently used to replace those from Qualcomm. Maybe most importantly, the 5G chips were becoming a huge problem that had Apple possibly missing the 2020 target for a 5G iPhone and insulted that Huawei thought the leading smartphone company was in such distress that it would dare accept a Chinese chip in its 5G iPhones.

Possibly the biggest key is the Qualcomm

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Disclosure: I am/we are long QCOM, AAPL. 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.

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

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