ZTE presents new challenge for Qualcomm - Mobile World Live

ZTE presents new challenge for Qualcomm

26 APR 2018

Qualcomm warned new US trade restrictions imposed on ZTE are expected to shave approximately $0.03 off its per share profit next quarter, adding another financial headwind as the company copes with ongoing royalty disputes.

ZTE has long used Qualcomm chips to power its handsets, but a ban put in place by US officials will prevent it from getting its hands on US components for seven years.

In its fiscal Q2 2018 (covering the period to 25 March), Qualcomm’s royalty battles with Apple and another major licensee took a hefty bite out of its bottom line, sending profit plunging 52 per cent year-over-year to $363 million.

Licensing revenue, which typically accounts for around half of Qualcomm’s earnings, dropped 44 per cent from $2.2 billion to $1.3 billion in the recent period, as the iPhone maker and another company (believed to be Huawei) held back royalty payments.

Qualcomm noted the missing royalties were worth nearly $1 billion in revenue in the comparable period of fiscal 2017.

Still, the company managed to grow total revenue 5 per cent year-on-year to $5.3 billion due to better than expected chip sales and lower operating expenses.

CEO Steve Mollenkopf said Qualcomm is preparing to face off with Apple in court “by the end of the year”, but noted the company would prefer to reach a settlement rather than going to trial. He added the company is in “active” discussions to negotiate a resolution with the other delinquent licensee.

Regardless, Patrick Moorhead, president and principal analyst at Moor Insights and Strategy, observed this should be the last quarter Apple weighs on Qualcomm’s earnings comparisons.

NXP options
Qualcomm is also still waiting for Chinese regulatory authorities to approve its acquisition of NXP Semiconductors.

Though Qualcomm executives said the company is confident the deal will ultimately go through, they added it could opt for a $20 billion to $30 billion share buy-back programme in the event it is blocked.

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Diana Goovaerts

Diana joins Mobile World Live as its new US Editor, reporting on infrastructure and spectrum rollouts, regulatory issues, and other carrier news from the US market. Diana comes to GSMA from her former role as Editor of Wireless Week and...

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