Malcolm Owen
The settlement between Apple and Qualcomm to end lawsuits over patent licensing and infringement is costing Apple nearly $9 per iPhone on top of a single $6 billion payment, according to UBS.
On Tuesday, Apple and Qualcomm prematurely ended the patent licensing trial by announcing a settlement, one where Apple would pay an undisclosed amount to Qualcomm as well as arranging a patent licensing agreement. In a research note from UBS seen by AppleInsider, the deal was extremely beneficial to Qualcomm.
UBS suspects that Apple was having trouble securing non-Qualcomm 5G modems for the 2020 iPhone refresh. Taken along with 18-month development times for iOS devices, this apparently put Apple in a "tough position," and prompted the settlement.
While Qualcomm has stayed quiet about how much it will be earning, aside from anticipating a $2 per share incremental EPD for the next quarter, UBS suggests the amount Apple will be paying per device is in the range of $8 to $9 per device. This is a "solid outcome" to Qualcomm, higher than the $5 assumed by the firm previously.
The earnings per unit do not include a "bullet payment" for royalties in arrears from Apple, which UBS pegs at between $5 billion and $6 billion.
The return of Qualcomm to Apple's modem supply chain for 2020, as well as Intel's bowing out of the 5G smartphone modem market, has helped increase UBS' valuation of Qualcomm. The firm maintains a "neutral" rating on Qualcomm's stock, but has raised its 12-month price target from $55 to $80, just above the $79 Qualcomm stock value at the time of publication.
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48 Comments
So much for this being kept secret eh? So far both stocks are up so that is a good thing. I for one am glad cooler heads prevailed. We own both.
It's all moot in 3 years when Apple brings to market its own chips. This deal is just a bridge to get there. And then Qualcomm will be shown the proverbial door. And, the FTC anti-monoply trail is still upcoming - that could turn this all on its head on its own
But you'd never know this looking at the QCOM stock surge over the last couple of days
By the sound of it if Apple is paying Royalties over and above any that are included in the modem chip costs. Apparently Qualcomm is still double dipping and it appears there's nothing whatever Apple can do about it if they want iPhone modems.
I cannot reveal my source, but I am absolutely certain these numbers are not correct.