Bitter Bite: Qualcomm Updates Q3 Guidance On Apple Interference

Qualcomm disclosed earlier this month Apple's ODM partners including Foxconn and Pegatron underpaid Qualcomm around $1 billion, the amount Apple believes it is owed relating to a Cooperation Agreement.

On Friday, Qualcomm said in a press release it was officially informed by Apple the Cupertino-based company will be withholding payments to its contract manufacturers for the royalties those companies owe under various licenses with Qualcomm. Apple also informed Qualcomm it will continue to do so until a dispute with Qualcomm is resolved.

Shares of Qualcomm were trading lower by more than 4 percent Friday morning at $51.00 — less than $1 removed from its 52-week low of $50.11.

Apple Is 'Improperly Interfering'

Qualcomm's executive vice president and general counsel Don Rosenberg said in the company's press release Apple is "improperly interfering" with the company's long-standing agreements with its licensees, which are very much "valid and enforceable."

"While Apple has acknowledged that payment is owed for the use of Qualcomm's valuable intellectual property, it nevertheless continues to interfere with our contracts," Rosenberg added. "Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade."

Guidance Update

Qualcomm stated that based on the ongoing dispute with Apple it has no choice but to lower its third-quarter guidance, which was initially offered on April 19.

The company lowered its third-quarter earnings per share guidance from a range of $0.90 to $1.15 to a new range of $0.75 to $0.85 per share. This figure is short of the $1.19 per share analysts were expecting.

Qualcomm also lowered its third-quarter sales outlook from a range of $5.3 to $6.1 billion to a new range of $4.8 to $5.6 billion, also short of the $5.94 billion analysts were expecting.

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