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Apple paying Qualcomm $9/iPhone - UBS

Apr. 18, 2019 12:23 PM ETApple Inc. (AAPL) Stock, QCOM StockAAPL, QCOMBy: Brandy Betz, SA News Editor204 Comments
  • UBS analyst Timothy Arcuri estimates Apple (NASDAQ:AAPL) paid $5B to $6B to Qualcomm (NASDAQ:QCOM) to settle the global litigation.
  • Arcuri used Qualcomm's post-deal guidance that EPS will increase by $2 to calculate that Apple also probably agreed to pay $8 to $9 per iPhone in patent royalties.
  • The companies didn't reveal financial specifics in the settlement announcement.
  • Arcuri had been one of the voices questioning whether Apple could have a 5G iPhone out in 2020 because Intel wasn't going to have a modem chip ready in time. Intel fired back and said it was still on schedule, but then dropped its 5G phone modem attempt after the Apple-Qualcomm announcement.

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Comments (204)

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j
Look at the QCOM opening argument slides, posted on CNET. I don’t think Apple was in a position to win. The award of courage goes to the Apple legal staffer who had to convince Cook to fold.
DanoX profile picture
It was the sales department not the lawyers.
LongStock profile picture
Even if $QCOM is getting 8 or 9$/iPhone doesn't give them any right to bully such a great company as QCOM. I agree that adding Qualcomm to Apple is a great achievement but Apple has no right to bully smaller companies than Apple. Qualcomm is a very good wireless telecommunications company and any company getting a chance to work with them are lucky.

Their Stock price is currently 86.64 and at 1.85 up and that "Arcuri used Qualcomm's post-deal guidance that EPS will increase by $2 to calculate that Apple also probably agreed to pay $8 to $9 per iPhone in patent royalties."

If their EPS go up by 2$, I'm absolutely sure that QCOM 's stock will get even better and stockholders will buy even more from then, QCOM 's situation in terms of stock is looking pretty good so far.
S
I am so curious about my 80 dollar calls expiring next Friday. If qcomm hits 83 before Friday I can make some money. Can I ? I am a bit nervous. Thanks
v
@louisStevens @Arniew Mollenkof and Cook have both shown who has wife and kids and how far and long they will go to defend them
Mili21 profile picture
@vjoy
In business competition and more so with investment , there is no place for emotions......
no need to check who has family and kids and what not....
be practical and deal with it......
Cook / Mollenkof are incharge of their respective organizations and know how to deal with each situation strategically and tactically, way better / more than we individual investors......
v
This was specifically for louis stevens who dragged in wife, kids and family
v
@metoo5 wake up and see for yourself none of the things you predicted have befallen on qcom. Meanwhile everything you said about Apple and crook's leadership has turned a big nothing as we rest of us knew from the beginning. Barking dogs never bite, bully has been shown his spot.
Hudson Investments profile picture
@vjoy how do you explain the stock rising?
v
Crooks broth is cooked
All*AAPL profile picture
vjoy said:
===
"Meanwhile everything you said about Apple and crook's leadership has turned a big nothing as we rest of us knew from the beginning."
===
***...Apple and Cook's leadership has turned many long-term AAPL investors into *wealthy* investors and turned many Apple naysayers bitter.

FIFY vjoy.
Wildbiftek profile picture
u
knowing its business, but anyone without a strong bias favoring apple cannot help but feel disgusting on the dirty. this is potentially another reason apple settles. TC wants the image of angel in front of people and always polices other company behaviour, so he cannot afford more scandels coming out, this opening arguments are just opening, if not stopped, there would have been evidence of "apple helping facilitate AVGO hostile bid"; "apple giving QCOM trade secrets to INTC for years" exposed to public. imagine the potential effects.
Hudson Investments profile picture
@useryy That's right. It was bad press. Apple needs to maintain a friendly image.
Whether or not the points you make are true, it just looks better to negotiate a mutually agreeable end to the discord.

The real reason was Intel could not make 5G modems for Apple's next iteration of the iPhone..
Louis Stevens profile picture
there would literally be none. no average apple product consumer even knew qcom and apple were in a legal dispute.
I read a piece today that gave a perspective I hadn't considered previously, which was that Intel bailed on 5G prior to announcing publicly that they had done so. If that happened to be correct, it would have put Apple in a serious bind and perhaps convinced them it was time to deal before the case went too much farther. Regardless, it seems like Qualcomm is offering someone that no one else can currently provide. It's hard to understand the optics on this one, which is that Qualcomm benefited enormously more than Apple. Apple is a juggernaut so its hard to fathom why they would roll over.
AjitMD profile picture
Apple is not going to have 5G iPhone this year. Not until end of 2020. They will get hi with the Osborne Effect. Old iPhone users will either wait or go with Android. New smartphone shopper will go with Android 5G. Apple will loose additional market share while discounting.

Their services biz is DOA. Depends on iPhone market share. It is mostly about rip-off prices on storage, extended warranty, some Apple Store. Apple Pay is limited to iPhones with limited market share. Credit card is lame and late.

As it is Apple was loosing market share. The 5G fiasco could do some serious damage to their valuation. Falling profits and PE compression.
w
Which stock has more upside potential? Aapl or Qcom?
Louis Stevens profile picture
Depends on how many shares Apple buys back in the coming two years from my perspective.

FCF and revenue growth are relatively stable and slow to grow at Apple going forward.

I own both and plan to add in the coming year.
DanoX profile picture
Qualcomm isn't at the top of the software/hardware/cpu pyramid see Intel for your answer they are a very well paid tech parasite who can't win against Huawei in the greater world.
Hudson Investments profile picture
Making peace with Qualcomm was a brilliant move by Tim Cook because this will sell more iPhones.
It is widely known that Qualcomm has the best modem technology. When 5G comes out, Apple will make up the $9 cost by passing a multiple on in the cost of the smartphone.

The 5G iPhone with a Qualcomm modem will be a must buy upgrade for all iPhone users. That means record numbers of 5G iPhones will be sold. Records will be broken.
The iPhone will be back.
D
@ArnieW

Completely logical reasoning. So that begs the question why he went thermonuclear on Qualcomm in the first place. Why all the bluster and why delay working on 5G?
New Low Observer profile picture
"So that begs the question why he went thermonuclear on Qualcomm in the first place. Why all the bluster and why delay working on 5G?"

Because a $5-$6 billion interest free loan over two years is far more valuable than paying your bills on time at far above $6 billion.
1222
20 Apr. 2019
From public image, perception and technology lead point of view, Apple has lost more than 6B. One time will tell you !!
SEC Investigator2 profile picture
Samsung just proved why Apple's always late! Article on ZD Net. Tim Cook is a disgrace and must be removed as CEO!
TopGun2 profile picture
Agreed! I mentioned the very same thing about 6 months ago that Tim Cook is cooked. No innovation whatsoever. The new ideas of subscription services will be mostly a flop. Why should I pay for a news service if there is so much news available for free? Fox news, AP news, Reuters, to just name a few.
DanoX profile picture
The most profitable tech company by far (not even close), but Tim Cook is in trouble?
okpj profile picture
okpj
19 Apr. 2019
Arcuri has no inside track on a confidential agreement. His opinion holds no weight whatsoever to me or other informed investors.
k
"QualComm Tax", "Double Dipping", "No License No chips" etc which are brought by Apple and its supporters to be investigated for future prosperity and long term interests of industry.
In a way Apple has fooled all its supporter by settling and being silent without any explanation. Valuable time of all the legal agencies is wasted.
If not US, all the other FTCs in world have right to scrutinize the deal terms to avoid any anti competitive practices and compromise other players long term interests.
i
kira, Apple Inc is following the corporate playbook set down by Steve Jobs. Apple is secretive, but not to a fault.

Microsoft and Google announce projects that have not yet begun. Apple prefers to work quietly and later spring new products and services on their public at Apple events, just before releasing them to the public.

SA: there is little news here, businesses minding their own business.

SA: you might take notice of the extreme astroturf'ing continuing on SA from the Qualcomm corporate playbook. Enron used to rely on astroturf'ing to keep critics at bay, until a binary event took down Enron.
S
QCOM is definitely the big winner here at the end of the day. INTC might turn out to be the biggest overall loser out of this entire deal.
Mili21 profile picture
@Soto1
INTC is loser, so no one will talk about it in details and for long....
This topic AAPL v/s QCOM will go on for some time...
If INTL had been successful in delivering the chips to AAPL on time with reasonable quality and QCOM were to settle the litigations, AAPL / INTL investors would have argued the other way.........
s
Any thoughts on FTC case? Is it still significant threat for QCOM? Ty for your thoughts in advance.
D
We know that Korean FTC works for Samsung. China FTC works for Huawei. US FTC, well this is odd, also works for Huawei.
vkvraju profile picture
Say the last part again. US FTC works for communists. Huawei from China and Apple locally.
Rogerama profile picture
Excuse me? That reads as if you think Apple is communist. That’s a stretch even for SA comments, which are often irrational but hardly ever this far divorced from reality.
B
For those pronouncing Apple a "loser" in this I would say the verdict on that is still out. Apple has secured an uninterrupted supply of radio chipsets to carry it well into the life cycle of 5G. At the end of 6 years, Apple can extend for two additional years. Do not think Apple will not be looking bring this aspect of it business in-house.
j
apple is not a loser but there are a bully that backed down.
d
AAPL will never be able to catch QCOM in the chip business.
Clauser1960 profile picture
Sure Bayou, Apple has secured the same supply it dd not want to pay for.
d
e1 seems to like guessing how much qcom got...here is the answer...a lot...As for pricing, was $7 on $700 phone and now $9 on a $1,200 phone...still cheap for what they get in return.
Shangrila Value profile picture
As an owner of both companies, I'm satisfied.
nealyohara profile picture
Apple will make up the cost in time. Not saying how much time, but in time.
d
It is a capitalized expense and AAPL will not make up the cost in any time.
lshiang profile picture
If Tim Cook is as capable as Steve Jobs, he will certainly get even with $QCOM one day. But...
j
get even for what? paying for qcom's technology? strange post
lshiang profile picture
I don't think Apple wants to be controlled by $QCOM, especially pricing power when there is no other alternative 5G modem chip supply to iPhone, at least from some third-party it can trust. That is also why these two are tied up in ugly legal battle around the world for so long. Intel has screwed up itself in the long term, but also force Apple to make decision prematurely.
DanoX profile picture
Not strange if Apple didn't know before they do now, in house is the only way...Watch and see how many other things Apple moves in house in the coming years.
rsucre profile picture
It seems that INTC was bluffing. Helping AAPL's posture in the negotiation with QCOM?

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