• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Technology

Qualcomm's Fight With Apple Remains an Overhang for Its Stock - Tech Check

Qualcomm's legal fight with Apple continues to rage, and the company is also mired in a battle with the FTC that could have big implications for its patent-licensing business.
By ERIC JHONSA
Mar 4, 2019 Updated Mar 04, 2019 | 04:29 PM EST
Stocks quotes in this article: QCOM, AAPL, INTC, AMZN, GOOGL, BABA, ODP, AXP, SSNLF

Qualcomm's Fight With Apple Remains an Overhang for Its Stock

As one more battle opens up in Qualcomm  (QCOM) and Apple's (AAPL) bitter dispute over iPhone royalty rates, there's still no sign that a settlement will be arriving anytime soon.

On Monday, an eight-day patent infringement trial involving the companies is kicking off at a federal court in Qualcomm's hometown of San Diego. Qualcomm is alleging that iPhones packing Intel (INTC)  modems infringe three of its non-standards essential patents, and is seeking up to $1.41 per infringing device sold between mid-2017 and the fall of 2018.

Even if Qualcomm scores a full victory in this trial, which is one of many battles the company is fighting with Apple across three continents, it's hard to imagine Apple feeling pressured to settle because of it. The company could appeal an adverse ruling, and just as importantly, the damages that Qualcomm is seeking here are equal to just a fraction of the patent royalties that the companies are fighting over.

Only about half of the iPhones sold during the time period in question are believed to have contained Intel modems. And in recent testimony, Apple COO Jeff Williams indicated his company has been paying Qualcomm a royalty of $7.50 per iPhone. Though this figure is much less than what many peers are believed to pay Qualcomm per high-end phone sale, Apple has been arguing it should pay much less; in a 2017 Bloomberg article, the company's legal chief was quoted saying Apple's per-device royalty payment should be "$4 or so."

In addition, the FTC's antitrust suit against Qualcomm, which (following hearings in January) is awaiting a ruling by a San Jose federal court, could also motivate it to keep fighting. Among other things, the FTC wants Qualcomm to license its valuable standards-essential patents (SEPs) covering 3G, 4G and 5G mobile standards to rival modem makers such as Intel, which would result in devices containing rival modems being covered by the modem licenses.

In November, Judge Lucy Koh (previously responsible for overseeing some of Apple's legal battles with Samsung (SSNLF) ) granted the FTC a partial summary judgment ordering Qualcomm to license its SEPs to modem rivals on fair, reasonable and non-discriminatory (FRAND). Should Qualcomm ultimately be required to do this -- Koh still has to issue a final ruling, and Qualcomm would presumably appeal a negative ruling -- it could seriously harm Qualcomm's licensing model. That's because the requirement would result in Qualcomm only collecting royalties on many of its patents based on a modem's selling price, rather than a phone's selling price (subject to a cap).

Throw in the fact that Apple has been able to use workarounds and software updates to sidestep recent iPhone bans won by Qualcomm in German and Chinese patent cases, and the dispute doesn't appear likely to be resolved in the near-term, at least unless one of the parties agreed to major concessions relative to its current negotiating stance.

Should Qualcomm reach a deal with Apple that doesn't require major concessions, its stock would almost certainly pop on the news. Even though Qualcomm's near-term earnings are pressured by its licensing disputes with Apple and China's Huawei, as well as by soft smartphone demand, shares only trade for 14 times a fiscal 2019 (ends in Sep. 2019) EPS consensus of $3.82. And while its licensing business is having a rough time, Qualcomm's chip business looks primed to turn a corner thanks to its investments in 5G, RF, automotive and IoT offerings.

But as the old saying goes, markets hate uncertainty. And for now, between its ongoing battles with Apple, Huawei and the FTC, there's still a lot of uncertainty surrounding Qualcomm's licensing business, which has historically produced the majority of its pre-tax profits.


Alibaba's Deal With Office Depot Could Be a Sign of Things to Come

March 4, 2019 | 1:14 PM EST

This post has been updated with quotes from Office Depot CEO Gerry Smith and Alibaba exec John Caplan.

Many of the large U.S. retailers battling Amazon.com (AMZN) have found Alphabet/Google (GOOGL) to be a useful partner. To some extent, the same could hold true for Alibaba (BABA) .

Office Depot (ODP) , which is expected on average by analysts to see its revenue stay roughly flat in both 2019 and 2020, is hoping a new partnership with the Chinese e-commerce giant will give it a revenue boost. The tie-up, announced on Monday morning, involves the creation of an Office Depot-branded website on the Alibaba.com e-commerce platform, which caters to non-Chinese businesses looking to buy goods wholesale (often from Chinese merchants).

The website offers discounts on Office Depot purchases to customers who use it to place orders on Alibaba.com. Office Depot plans to promote it to its 10 million-plus U.S. business customers, and work with Alibaba to provide customer support for orders placed on Alibaba.com.

During a call with TheStreet, Office Depot CEO Gerry Smith said his company would use a number of approaches to promote the partnership to customers. "We're going to use 1,800 sellers, we're going to use our 1,350 stores," he said. "We're going to use every platform that we have, and we're going to use...both traditional and non-traditional media."

Interestingly, Alibaba and Office Depot also plan to collaborate on cross-border logistics and fulfillment, with the goal of shortening delivery times for overseas orders, as well as to help U.S. small and mid-sized businesses (SMBs) sell via Alibaba.com.

"One of the things that attracted us to collaborating with Office Depot is that they have a distribution footprint in the U.S. that reaches 99% of U.S. businesses next day," said John Caplan, the North American lead for Alibaba.com, during the call about the planned logistics collaboration. "Fulfillment is a point of pain for small businesses."

The move comes not long after Alipay parent Ant Financial, which Alibaba has a 33% stake in, struck a deal to buy British money-transfer firm WorldFirst, with an eye towards facilitating cross-border transactions. It also comes as the company is overhauling Alibaba.com, revamping the platform's tech infrastructure, as well as launching value-added services in areas such as logistics and financing.

Office Depot might be eager to get whatever e-commerce help it can get right now. As the company's revenue growth and stock price both flatline, Amazon's business sales appear to be growing at a brisk pace. Last September, Jeff Bezos' firm disclosed that its Amazon Business marketplace was on pace to do more than $10 billion in sales volume in 2018, just three years after it first topped $1 billion.

The disclosure arrived 11 months after Amazon launched its Business Prime service; U.S. pricing ranges from $179 to $10,999 per year, depending on how many users are supported by an account. Last October, Amazon rolled out several new perks for Business Prime accounts, including free same-day and one-day shipping for eligible, $35-plus orders and access to an Amazon-branded American Express  (AXP) card that provides 5% back on Amazon Business purchases.

Alibaba certainly isn't a cure-all for the competitive threat that Amazon poses for a company like Office Depot. However, between the company's ability to connect U.S. business with Chinese buyers and sellers, as well as the expertise it has built up over the years in fields such as logistics, retail analytics and payments, there are plenty of reasons for a U.S. retailer scrambling to grow its online sales to turn to it for a helping hand.

To see Tech Check coverage from the previous trading day, click here.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.
TAGS: Investing | Technology |

More from Technology

Cisco Is Rockin' Steady and Here's How to Invest in It

Stephen Guilfoyle
Aug 18, 2022 11:00 AM EDT

Don't expect the CEO to hit a grand slam, and don't expect him to make any huge mistakes.

Sloppy Wednesday, Parsing Retail Sales, Dissecting Fed Minutes, Shiny Apple

Stephen Guilfoyle
Aug 18, 2022 7:36 AM EDT

Plus, we check out how the market is handicapping future rate hikes and the latest GDP guesstimate out of the Atlanta Fed (it's lower again).

2 Big-Name, Single-Stock ETFs With a Foreign Twist Could Be on the Horizon

Mark Abssy
Aug 16, 2022 12:00 PM EDT

The potential offerings from Roundhill aren't geared solely to the retail investor but also could interest smaller institutions and other ETF issuers.

A Cannabis ETF and a Micro-Cap Stock That Have Grabbed My Attention

Bob Byrne
Aug 15, 2022 8:30 AM EDT

The ETF is showing signs of perking up and the micro-cap is a maker of electric outboard motors.

Don't Get Burned on First Solar's Rocket Ship Higher

Bruce Kamich
Aug 11, 2022 11:30 AM EDT

The stock may be getting to close too the sun.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:23 PM EDT STEPHEN GUILFOYLE

    We're Cleaning Out This Retailer From the Bullpen

    Check out the latest moves in TheStreet's Stocks U...
  • 10:24 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login