When Apple and Qualcomm unexpectedly settled their long-standing legal feud on the day opening arguments were supposed to begin in court, the companies did not disclose the amount that Apple was paying Qualcomm to end their war once and for all.
Despite the announced benefits from the deal with Apple, Qualcomm shares fell about three percent in afterhours trading to $83.39, according to MarketWatch.
Until now, all we knew was that the settlement included an unspecified payment from Apple to Qualcomm, alongside a multiyear chipset supply agreement that will see the chipmaker's modems once again appear in the iPhone; when the legal drama began back in 2017, Apple dropped Qualcomm as a supplier and exclusively relied on Intel as its provider of LTE modems.
Qualcomm also revealed it will be the chip provider in the next two years and will include direct six-year licensing agreement. But Qualcomm's forecasts suggested Apple's licensing fees were not a big enough revenue boost to offset a weakening smartphone market. As for GAAP revenue, Qualcomm expects between $9.2 billion to $10.2 billion, which includes an estimated $4.5 billion to $4.7 billion resulting from its settlement with Apple.
In prepared remarks, Qualcomm CEO Steve Mollenkopf expressed his pleasure at having reached multi-year agreements with Apple and said he looks forward to "continuing to support them as a customer".
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There was equally "bad" news on the revenue side after sales also fell to $58bn in the quarter, down from $61.1bn a year earlier. How Apple TV + and Apple Arcade will be received is unclear, but Apple's existing services are already bolstering this effort.
This is pretty dang huge for Qualcomm.
For the quarter ending March 31, Qualcomm recorded net income of $700 million on revenues of $5 billion.
$4.5B isn't much money by Apple standards.
So what's it costing Apple? Even in a down quarter, Apple still made $225.4 billion in cash in Q2. Apple on Tuesday said its gross margin guidance, which was largely unchanged from previous quarters, included the Qualcomm settlement. "I think they both came out well in the deal and am very impressed (Apple Chief Executive Tim) Cook agreed to it".
The Southern California-based company also factored in revenue expected for new royalties from Apple and the makers of its devices. After all, Apple's projected revenue for Q3 was pretty much unaffected by the loss of that five bil.