New Qualcomm-Samsung alliance to ease antitrust woes
Qualcomm has struck a broad new alliance with Samsung, which could help the mobile chipmaker resolve its antitrust case in South Korea and fend off a hostile takeover bid from Broadcom.
As part of a new patent cross-licensing agreement, Samsung “will be withdrawing its interventions” into Qualcomm’s appeal against a Won1.03tn ($868m) fine in 2016 over what the Korean Fair Trade Commission called “excessive” licensing fees.
Qualcomm did not disclose terms of the amended deal but said it was “consistent” with its “global handset-level” pricing.
The two companies also said that they would work together on a “multiyear strategic relationship” for Qualcomm’s processors that includes the “transition to 5G”, as device makers and network operators prepare for a new generation of superfast wireless networks launching in the coming years. Last week, Qualcomm secured similar commitments on 5G from a group of Chinese smartphone makers, including Xiaomi, Oppo and Vivo.
The deals were announced as Qualcomm reported first-quarter revenue growth of 1 per cent to $6.1bn, as licensing revenues were again hit by its ongoing legal dispute with Apple and its suppliers over iPhone royalties.
Qualcomm swung to a net loss of $6bn in the three months ending in December, largely due to the impact of new US tax legislation, including a one-time $5.3bn tax bill on its overseas profits, as well as a $1.2bn hit from a European Commission fine over what the regulator alleges was its anti-competitive deal with Apple. Losses per share were $4.03, down from earnings of 46 cents a year ago.
Qualcomm’s shares, which closed up 1.9 per cent on Wednesday at $68.25, were broadly flat in after-hours trading but fluctuated as investors digested the slew of announcements.
The San Diego-based company said that revenues for the quarter ending in March would range between $4.8bn to $5.6bn. Going into the quarter, Wall Street had estimated revenues of $5.6bn for what is Qualcomm’s fiscal second quarter.
Qualcomm needs to demonstrate strong momentum in its business to help it rebuff a hostile $70-per-share takeover bid from rival chipmaker Broadcom. As part those efforts, it announced a $1bn-per-year cost reduction programme earlier this month.
Patrick Moorhead, analyst at Moor Insights, said that the Samsung deal was a “surprise move”.
“The Samsung announcement is important as it lowers Qualcomm uncertainty which has weighed on the stock for a year and contradicts many of Broadcom’s claims of a broken model,” Mr Moorhead said.
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