By CCN: A two-year legal battle between chipmaker Qualcomm and tech giant Apple was settled today, propelling Qualcomm's stock higher by a double-digit percentage. Investors cheered a thawing in relations between the two tech giants. Market cap rose from approximately $70 billion on April 15…
By CCN: A two-year legal battle between chipmaker Qualcomm and tech giant Apple was settled today, propelling Qualcomm’s stock higher by a double-digit percentage. Investors cheered a thawing in relations between the two tech giants. Market cap rose from approximately $70 billion on April 15 to currently hover at $95 billion.
The end of various legal disputes between the companies was quickly followed by an announcement by another tech leader. Intel said it is abandoning plans to design chips for Apple’s next-generation 5G series of smartphones, paving the way for Apple to start using Qualcomm’s chips again.
As the news broke, Qualcomm’s stock made its biggest single-day gain since 1999, rocketing to $70, which reflects its highest point since October.
The deal is expected to increase Qualcomm’s revenue per share by $2, adding a total of $2.4 billion to revenue, according to analysts cited in The New York Times.
Apple’s stock moved higher too, but the gains were much more modest.
Apple investors like what they see. | Source: Yahoo Finance
Apple and Qualcomm had been mired in a string of legal fights over intellectual property, contract disputes, and royalty payments, fights that weren’t doing either company any good.
Roger Kay, an analyst with Endpoint Technologies Associates, reportedly said:
“This is an enormous win for Qualcomm because the suit and related suits were life-threatening to the company. For Apple, a loss would have been financially punishing, but for Qualcomm, this would have destroyed the business. This is like a new lease on life.”
The cases included a $30 billion licensing wrangle that went to trial on Monday in San Diego.
As Qualcomm’s attorney was delivering his opening argument in court, news of the settlement filtered through. A joint statement from the companies said:
“Qualcomm and Apple today announced an agreement to dismiss all litigation between the two companies worldwide. The settlement includes a payment from Apple to Qualcomm.”
The companies also reached an agreement to partner into the future:
“The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multi-year chipset supply agreement.”
The fight began after Apple accused Qualcomm of over-charging for the use of its chips, claiming it was anti-competitive. In turn, Qualcomm accused Apple of stealing its intellectual property and giving it to rival manufacturer Intel.
The advent of next-generation 5G wireless technologies and the ongoing rivalry with Samsung for domination of the smartphone market likely led to the settlement and brought both companies to the negotiating table.
Meanwhile, rumors were swirling for weeks that Intel couldn’t produce the modems Apple needs for its 5G iPhone. Intel’s sudden decision to abandon plans to produce 5G modems appears to confirm this theory.
The deal means Apple can use Qualcomm’s 5G chips in its iPhones, helping it to compete with the Android operating system.
Last modified: January 10, 2020 8:59 PM UTC