Chip maker Qualcomm might be happy with its recent fiscal performance, but a legal stoush with tech giant Apple might affect its profits for the third quarter of 2017. It is alleged that some of Apple’s contractors are withholding royalty payments to the San Diego-based company.
In a statement released on April 19, Qualcomm said in part:
Our guidance range for fiscal Q3 2017 earnings per share is wider than our typical practice primarily due to the uncertainty around whether Apple’s suppliers will withhold some portion of the royalty payments they are obligated to pay under their contracts with us. We have considered a variety of scenarios within the range. However, our guidance range does not include the case where no payments are made by Apple suppliers.
According to a report in the Financial Times “some of Apple’s contract manufacturers have withheld around $1bn in royalty payments to Qualcomm in recent months”.
However, Qualcomm won’t be put out on the street just yet. Strong sales of Samsung’s Galaxy S8 means that the company’s chips are still in demand. And if the market is an indicator, investors are not taking the legal issues to heart as Qualcomm’s stock rose two per cent after the announcement was made.
The lawsuit revolves around allegations from Apple that Qualcomm has overcharged the Cupertino-based firm by billions of dollars over several years. The dispute is ongoing.