Qualcomm: Apple Dispute Hurt Q3 2017 Profits

Qualcomm told investors that its legal dispute with Apple harmed its Q3 revenues. But the company won't back down--chief executive Steve Mollenkopf said on an earnings call that Qualcomm will "appropriately defend the tremendous value that our innovations bring to this industry."

The companies have gone back and forth since January, when Apple sued Qualcomm for $1 billion and 1 billion yuan in San Diego and Beijing, respectively. Apple claimed that Qualcomm charged unfair royalty fees on the baseband processors used in the iPhone; Qualcomm said that Apple "intentionally mischaracterized [their] agreements and negotiations" by "misrepresenting facts and withholding information" in talks with regulators.

Things only escalated from there. Qualcomm said in April that Apple had withheld royalty payments from manufacturers, and in May, it said that Apple had urged its partners to break their contracts. In the meantime, Samsung and Intel filed amicus briefs in the FTC's antitrust case against Qualcomm, alleging that the company had violated Fair, Reasonable, And Non-Discriminatory (FRAND) patent terms to stifle competition.

In the Q3 earnings call, Mollenkopf said Qualcomm knew that "fundamentally these issues are driven by commercial interests and contract negotiations" and that it would "continue to work to reach resolutions as we have done in the past." He also reaffirmed Qualcomm's commitment to working with Apple despite the legal dispute:

As you know, we have a strong relationship with Apple for many years and they have been a long standing and valued customer. We intend to continue to provide them with our industry leading products and technologies as we always have and do our best to remain a good supplier to Apple even while this dispute continues.

But earlier this month, that didn't stop Qualcomm from trying to stop the import and sale of iPhones that don't use its baseband processors. You can't call them "frenemies," but it's clear that as much as Qualcomm and Apple want to prevail over the other, they also need each other to thrive.

Qualcomm president Derek Aberle said on the earnings call that Qualcomm expects the FTC's antitrust case to head to court by early 2019. In the meantime, Qualcomm will continue to work with its licensees to mitigate Apple's effect on its business. He also discussed the patents Qualcomm has accused Apple of violating and, naturally, all the other stuff you'd expect from an earnings call. You can find a full transcript of the call on Seeking Alpha.