Apple CEO Tim Cook: We Feel Good About Resolution With Qualcomm

During today's earnings call covering the second fiscal quarter of 2019 (first calendar quarter), Apple CEO Tim Cook was asked about Apple's settlement with Qualcomm.

While Cook declined to provide color on how this will affect Apple's development plans in the future, he did say that Apple is satisfied with the resolution.

We're glad to put the litigation behind us and all the litigation around the world has been dismissed and settled. We're very happy to have a multi-year supply agreement and we're happy that we have a direct license arrangement with Qualcomm that was important for both companies. We feel good about the resolution.
Apple and Qualcomm reached a settlement in mid-April and agreed to drop all litigation in multiple countries around the world. Apple made a one-time payment to Qualcomm and inked a six-year licensing agreement to use Qualcomm's patented technologies.

The settlement also included a chipset supply agreement, and Qualcomm is expected to provide the 5G chips that Apple will need to introduce 5G connectivity in its 2020 iPhones.

While rumors have suggested Apple is going to add 5G in 2020, Apple itself has not confirmed those plans and Cook did not provide details on Apple's 5G timeline when asked. He did, however, say that Apple aims to get new technologies into products as soon as it can.
We look at a lot of things on the different technologies and try to look at and select the right time that things come together and get those into products as soon as we can.
After Apple and Qualcomm announced their settlement agreement, Intel said that it was dropping out of the smartphone modem chip market entirely, with no plans to manufacture 5G chips.

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11 months ago
pretty much: "We feel like we were going to lose the trial"
Rating: 16 Votes
11 months ago
Translation: Intel’s modems suck and we don’t have what we need in order to ship our own modems yet so hello again, Qualcomm.
Rating: 14 Votes
11 months ago

pretty much: "We feel like we were going to lose the trial"

"They found our internal memos indicating we were trying to mess them up for leverage. We got caught with our hand in the cookie jar and bent over because we were going to lose". IMHO
Rating: 11 Votes
11 months ago
You mean you feel good about basically caving in to the pressure and giving them everything they wanted? Okay Tim—we believe you. We really do.
Rating: 10 Votes
11 months ago
Considering they caved I don’t know why Apple would feel good....
Rating: 8 Votes
11 months ago
If Qualcomm's initial estimate for the incremental EPS effect of the agreement is more or less correct, then Apple got a favorable combination of royalty rate and chip supply terms. (The back of the envelope calculations aren't hard to do.) Of course, whatever the terms were they were also acceptable to Qualcomm. But, by the time of the settlement, Qualcomm had already had to accept that it wouldn't be able to impose the kinds of terms it had previously been able to impose.

The royalty rate aside, Apple was able to get what it had wanted - a direct licensing deal and a long-term chip supply agreement. Both of those things were important. Further, it's most likely that Apple didn't have to agree to a number of the onerous terms which it had previously had to agree to. So I'm not sure how this agreement can be seen as anything but a win for Apple.

That doesn't mean it was a loss for Qualcomm though. It's certainly a positive development for Qualcomm because Qualcomm was suffering quite a bit financially from the situation as it was. Any settlement that didn't amount to near complete capitulation (from Qualcomm) should have, I think, been considered a win for Qualcomm. (And I don't think this settlement amounts to a near complete capitulation for Qualcomm, though it surely gave considerable ground). It very much needed this dispute resolved. It's just that there's a new reality now for Qualcomm when it comes to how it can operate. That's in part due to the dispute with Apple (and other industry participants) and in part due to regulatory actions.

They both won. We'll lose some 49$ extra to the next generation iPhone.

Are you suggesting that iPhone prices will go up as a result of the Qualcomm - Apple settlement?

If so, why would that happen? If Qualcomm's estimate is close to accurate, Apple will be paying less (per device) in royalties (to Qualcomm) than it would have been before it started withholding them and filed suit.
Rating: 7 Votes
11 months ago

everything is great now

They both won. We'll lose some 49$ extra to the next generation iPhone.
Rating: 5 Votes
11 months ago
where are all these folks that i been arguing against whos been defending intel modem on par with qualcomm ?
Rating: 5 Votes
11 months ago
I see it as a positive for both companies... Apple was paying (2011) $7. Qcom wanted to increase $18-19.
They settled on (2019) $8-9, I believe.

Apple got rates similar to 2011.
Qcom got most of it's money that Apple was holding hostage and got a 6-year agreement AND as a side benefit sunk a competitor (Intel). And by resolving, resulted in a hefty stock bump for shareholders.

I think that's better than dragging it out for a few more years for both sides.
Rating: 4 Votes
11 months ago

How did it cost them billions of dollars? Apple was always going to have to pay royalties, both for the previous years (in arrears) and going forward.

Not according to Apple it wasn't. They withheld those payments to Qualcomm under the premise that they were illegal.

As it is, it will be paying considerably less than Qualcomm wants (for an all inclusive 5G license) and less than it would have had to pay (through its contract manufacturers under existing agreements) had it not started to withhold payments and filed suit.

And you're basing this on what? Wall Street disagrees with you:

"Apple could have paid Qualcomm between $5 and $6 billion to settle the two companies’ bitter legal battle, according to a new estimate.. Apple probably also agreed to pay between $8 and $9 in patent royalties per iPhone, estimated UBS, based on Qualcomm’s guidance that it expects earnings per share to increase by $2 as a result of the settlement. The UBS estimate suggests that Apple paid a high price to end a bitter legal battle that spanned multiple continents and threatened Apple’s ability to release a 5G iPhone and put pressure on Qualcomm’s licensing business model that contributes over half of the company’s profit."


Also, what makes you think Apple ended up saying yes to the kinds of things it had “stood up and said NO” to? Do you think Apple agreed to all of the onerous terms which Qualcomm had previously imposed?

Yes I do, and it's because Apple had no choice but to do so. To wit:
Rating: 4 Votes

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