Qualcomm’s profitability in the three months to 25 December was hit by a fine levied by South Korean authorities, though attention was firmly focused on a newly-started legal spat with Apple.
The company reported a net loss of $682 million for its fiscal Q1, compared with a profit of $1.5 billion in the same period of 2015. Revenue of $6 billion in the recent period was up 4 per cent year-on-year from $5.8 billion.
Qualcomm’s fiscal Q1 included an $868 million charge related to a Korea Fair Trade Commission (KFTC) investigation. While Qualcomm intends to appeal the fine, KTFC rules require the sum to be paid within 60 days of a written order, which was issued this week.
In a statement, Qualcomm CEO Steve Mollenkopf said the company is “pleased with the strong start to our fiscal year and the year-over-year earnings growth across both our semiconductor and licensing business”.
He also noted a planned $47 billion acquisition of NXP Semiconductors “accelerates our strategic transformation in the high-growth areas of automotive, IoT, security and networking”.
However, in the company’s conference call, the prevailing theme was the “recent legal challenges facing Qualcomm” – namely Apple lawsuits, and an investigation by the US authorities.
Mollenkopf said Qualcomm plans “to remain a good supplier to Apple even while this dispute continues”.
Qualcomm president Derek Aberle went on to specifically address some of the complaints lodged by Apple. He said the practice of levying fees based on device selling price rather than the value of components implementing specific technologies: “provides the licensee with the certainty that it has the rights needed to design, manufacture and sell devices, regardless of which components within the phone, implement the patents, or whether the component supplier has a license for those patents”.
Aberle also said Qualcomm caps royalties, meaning royalty rates stop increasing inline with the value of the device once a particular (unspecified) price point is reached.
He also said claims the company retaliated because Apple cooperated with government investigations were untrue: “We simply objected to Apple making false and misleading statements and withholding information, to motivate attacks against Qualcomm.”
The executive also noted Apple does not have a direct licence with Qualcomm, with royalties reported and paid by its contract manufacturer partners.
“These contracts that we have in place remain valid and enforceable,” he said.