?An Apple logo in a store in Beijing, China.
New York: Qualcomm Inc. said Apple Inc. is cutting off licensing payments related to the iPhone until their legal dispute is settled, forcing the chipmaker to lower forecasts it gave just last week and sending its shares tumbling.
The announcement escalates the fight between the world’s largest publicly-traded technology company and one of the main suppliers of components to its most important product. The two have traded accusations of lying, making threats and trying to create an illegal monopoly. Their spat involves billions of dollars of technology licensing revenue that, if permanently cut off or reduced, could damage Qualcomm’s main source of profit and help bolster Apple’s margins.
Apple has told Qualcomm it will stop paying licensing revenue to contract manufacturers of the iPhone, the mechanism by which it’s paid the chipmaker since the best-selling smartphone debuted in 2007, the San Diego, California-based company said in a statement. Qualcomm is therefore removing any assumption it will get those fees from its forecast for the current period. Apple doesn’t have a direct license with Qualcomm, unlike other phone makers.
“We’ve been trying to reach a licensing agreement with Qualcomm for more than five years but they have refused to negotiate fair terms,” Apple said in a statement. “Without an agreed-upon rate to determine how much is owed, we have suspended payments until the correct amount can be determined by the court."
Qualcomm said revenue in its fiscal third quarter ending June will be $4.8bn to $5.6bn, down from last week’s prediction of $5.3bn to $6.1bn. Earnings per share will range between 52 cents and 62 cents. Minus certain items, profit per share will be 75 cents to 85 cents.
Shares fell as much as 4.1 percent to $51.05 Friday morning. It was the lowest intraday price since June. They were trading at $51.80 at 10:35 a.m. in New York.
For Qualcomm, Apple’s move is a further infringement on its legal agreements with the contract makers of the iPhone, who also make devices for other companies. Those agreements predate Apple’s entry into the phone market and are still legally enforceable.
