Qualcomm probably didn’t get the full $7 billion payment it was hoping to score from Apple as a result of the two companies’ wide-ranging legal battle.
Full details of the settlement between Apple and Qualcomm weren’t revealed when the two sides announced their truce earlier this week. However, an UBS analyst used Qualcomm’s recent guidance to estimate how much Apple agreed to pay and it looks like both sides made some small compromises.
UBS analyst Timothy Arcuri said in a recent note to investors that Apple probably agreed to pay between $5 billion and $6 billion to settle the lawsuits. Qualcomm also raised its Earnings Per Share guidance by $2, which hints that Apple likely agreed to pay $8 to $9 per iPhone in patent royalties.
Apple vs Qualcomm comes to an end
One of the contentious points of the Apple vs Qualcomm legal battle was how much money Apple and its suppliers owed it in royalty payments. Apple refused to pay Qualcomm any money until the lawsuits were settled. It was estimated by some that Apple owed the company about $7.5 billion in back payments.
If the $8 or $9 figure per iPhone is correct it would be a big jump up in royalty payments for Qualcomm. Apple COO Jeff Williams revealed that Apple pays Qualcomm about $7.5 per iPhone sold.
Apple had to pay a steeper price to settle with Qualcomm if it wanted to get 5G chips into the iPhone in a reasonable timeframe. Intel was working to make 5G modems but it became clear at the beginning of 2019 that the company’s chips wouldn’t be ready until late 2020 at the earliest, with 2021 being a more likely date of launch.
Now that the two sides have dropped all their lawsuits and agreed to six-year licensing agreement, Apple has a path to adding 5G in 2020. Qualcomm’s stock has shot up nearly 40% since news of the settlement hit. Apple shares are also trading up, albeit with only single digit growth.