
Qualcomm and Apple agree to drop all litigation - saeedjabbar
https://www.apple.com/newsroom/2019/04/qualcomm-and-apple-agree-to-drop-all-litigation/
======
chollida1
Notes:

\- Apple pays Qualcomm a one time payment, no word on the size

\- Qualcomm is up almost 18% while apple is flat which tells you who this
affected more

\- ends all ongoing litigation

\- 6 year license and global patent license agreement that can be extended

 __NOTE __global license here is important as there was talk of just a US
based agreement before

\- new chipset supply agreement so don't look for Apple designed chipsets just
yet

\- Qualcomm might be finally done with litigation. China fined it $975M and
Korea hit it with an $865M fine. Though to be fair, both countries are hardly
neutral in this and its very reasonable to see these fines as a form of
tariffs to help their own domestic companies

\- wasn't a court ordered agreement which means both sides came together to
make this and it wasn't forced on them by the courts.

\- Qualcomm reported incremental EPS of $2 on its website, that's a fair bit
so this is probably a win for Qualcomm in the short term, note this doesn't
mean its bad for apple.

\- bring on the 5G iPhones now, perhaps this makes Samsung the biggest loser
out of this as apple is now ready for the nextgen cell service and Qualcomm is
no longer negotiation from a position of weakness

\- QCOM's licensing model lives on, good for them, makes them a big takeout
target now, could see $100 QCOM in that case, its at $70 now and was $57 at
the start of the day.

~~~
oflannabhra
I'm guessing the one time payment might be of large enough size that analysts
could figure it out based on quarterly statements, but I'm curious what the
patent royalty agreement looks like.

For Apple, I'm sure they'll still a) work on designing their own modems and b)
source modems from Intel.

~~~
carnagii
> b) source modems from Intel.

This settlement does not say good things about Intel's progress on 5G.

~~~
oflannabhra
Yep. I'd guess that they continue to source LTE modems from them, however.

~~~
Alex3917
All of their LTE modems, or just some of them like previous years?

~~~
oflannabhra
My bet would be they diversify their sourcing, if they can. In the FTC case
Apple stated that they wanted to buy 4G modems from Qualcomm, but Qualcomm
refused unless they were exclusive.

But who knows what the terms of the deal are.

------
leesalminen
I sure hope Apple puts Qualcomm modems back into iPhone. The Intel ones are
inferior in nearly every way.

I live in a poor reception area. With an iPhone + Intel modem, iOS reports 0
signal. With an iPhone + Qualcomm modem, I do get enough of a signal to make
calls and receive SMS.

Unfortunately, WiFi calling on iOS has also gone downhill in recent years (ATT
& VZW). It seems as though I have to have a bar or 2 of a signal for WiFi
calling to work. If I have no cell signal, WiFi calling connects/disconnects
every few minutes, even if I'm in the middle of a call.

~~~
bowmessage
Not saying I disagree with you but, anecdata: n=1

~~~
quickthrower2
Yeah could be the antenna or something else that is making the difference.

~~~
leoc
I have no idea if it _is_ the antenna, but if so it certainly wouldn't be the
first time for Apple.

------
mrkstu
Self-interest mandated this resolution. Both companies were risking more than
they stood to gain by winning their various suits.

Who nominally 'won' will depend on whether Apple is paying what it considers
reasonable royalties going forward and whether the patent agreements allow it
to utilize Qualcomm's IP in their own chipsets.

If Qualcomm has given up on tying patents to chips then it has effectively
lost. If they can maintain that position with everyone but Apple, they'll
probably be OK with the outcome.

Apple was forced to the table by its partner (Intel) being unable to supply 5G
in a timely manner, so it may very well had to give up more than it otherwise
would have.

~~~
Despegar
>If Qualcomm has given up on tying patents to chips then it has effectively
lost. If they can maintain that position with everyone but Apple, they'll
probably be OK with the outcome.

Apple now has a direct license with Qualcomm. The arrangement before that was
only the contract manufacturers had a license with them. It seems very likely
that the patents and chips got unbundled (at least for Apple).

The FTC case still seems like the main risk to their business model.

~~~
wyldfire
Since Apple was the major leverage for this case, I'd speculate that Apple
could apply that same leverage to get the US FTC to settle.

~~~
Despegar
I don't see why it's in Apple's interest to get the FTC to settle.

~~~
dafty4
Because this might have been one of the terms of the deal.

------
msravi
4G/LTE cellular baseband and RF is very hard to get right. Optimizing its
power consumption for different scenarios is very very very hard to get right.
The 4G graveyard is littered with companies that have tried and failed. TI.
Agere. Infineon. Renseas (Nokia). Broadcom. Intel. All these have over time
shut down their cellular baseband divisions. They've all released chipsets
that work. But none have got the performance-power equation right. Phones
built with their modems have all been battery drains that can't get you
through the day if 4G is turned on. Qualcomm is the only supplier to
consistently get this right.

~~~
hobbes78
Infineon not exactly... Intel's 5G chips were being developed by the former
Infineon Wireless Solutions unit, which was bought by Intel.

[https://en.wikipedia.org/wiki/Intel_Mobile_Communications](https://en.wikipedia.org/wiki/Intel_Mobile_Communications)

------
ineedasername
It sounds like Apple had deliberately embarked upon a legal Denial Of Service
attack. Qualcom produced documents [0] showing that apple actually had a plan
to weaken Qualcom over a 5 years period, a plan that included forcing them
into extensive litigation on multiple fronts.

I imagine the revelation of such a document played a significant part in
driving Qualcom to settle. That, and their own suit which basically said,
"Qualcom's licensing, that we agreed to, isn't _fair_ " (yes, I know that
drastically over simplifies the issue, but it is the crux of a portion of the
dispute)

[0]
[https://www.washingtonpost.com/technology/2019/04/16/apple-q...](https://www.washingtonpost.com/technology/2019/04/16/apple-
qualcomm-face-off-epic-courtroom-drama/?noredirect=on&utm_term=.cc36c11d97c3)

~~~
dodobirdlord
I think the more charitable interpretation would be "We have realized that
Qualcomm's licensing, that we agreed to, isn't _legal_." From what I
understand Apple's argument has essentially been that they don't _need_ to
license the technology from Qualcomm due to having an implicit license via
extinguishment at the level of their suppliers. Put that way it becomes
"Qualcomm has lied and tried to trick us into paying for something we already
had rights to." There's still an outstanding court case to settle this and
from what I understand the pretrial judgement is not favorable to Qualcomm.

------
mrlambchop
On the surface, this looks more positive to QCOM. However, I feel a good long
term play for APPL would be to negotiate a cap on royalties for all LTE
shipments through litigation like this, then fade in their own silicon in some
developing markets whilst keeping their eye on 5G deployments using modems
from the best vendor(s).

My 2 cents.

~~~
axaxs
FWIW, Apple's stock symbol is AAPL.

------
kev009
I will definitely be refreshing my iPhone in 2020 to get back on a Qualcomm
modem. In my area the difference was very apparent when I replaced a damaged
same generation phone and the radio changed to Intel.

------
donarb
Note that this is good not only for Apple, but the agreement also stops
Qualcomm litigation against Apple's contract manufacturers (Foxconn, Pegatron,
Wistron, and Compal). This helps Apple immensely by steadying their supply
chain.

------
epberry
Wow. I suppose Qualcomm will be the 5G modem supplier then? Stunning turn of
events. I thought the relationship was broken beyond repair. Great for
consumers though. I've been frustrated with the Intel modem on my phone.

~~~
codercotton
Especially considering Apple's hiring of baseband chip engineers...

~~~
tpush
They might still develop their own baseband eventually, intermittently using
Qualcomm to get to 5G.

~~~
hinkley
Apple has a lot of other devices besides phones that use cellular networks.

I wonder if you just care about data and not voice, how much of this quagmire
you can avoid? Ipads, watches, maybe Airs with data only chips, that'd be a
lot of chips.

------
franch
Charlie from semiaccurate has been following the story for a while:

(2017) [https://semiaccurate.com/2017/11/06/qualcomm-opens-apple-
leg...](https://semiaccurate.com/2017/11/06/qualcomm-opens-apple-legal-
filing/)

(2019) [https://semiaccurate.com/2019/04/16/qualcomm-just-beat-
apple...](https://semiaccurate.com/2019/04/16/qualcomm-just-beat-apple-into-
sumbission/)

That's also the reason why Intel is quitting 5G modems

------
gigatexal
What a shame. Qualcomm’s business practices are ludicrously bad. But it seems
Apple has no alternatives. In 7 years I predict they are making their own
modems.

------
an4rchy
I'm surprised that this news didn't impact Intel at all, good or bad, since
they were also a big part of this whole issue.

Does anyone have insight into why that is?

------
basetop
My god, it's 2019. I can't believe QCOM and APPL were still ligitating this.
How many years of lawsuits and counter-lawsuits has it been? I bet their
lawyers are some of the happiest people of this decade.

------
mythz
QCOM ended the day up 23.21% whilst AAPL was essentially flat for the day,
high of USD $201.35 closing at $199.25 so normal trading variance.

It appears that QCOM got the better end of this deal.

Does anyone know of the $2 EPS [1] is due to the one-time payment or an annual
EPS from the ongoing patent royalties?

[1] [https://investor.qualcomm.com/static-
files/3cb803e8-fc20-4ec...](https://investor.qualcomm.com/static-
files/3cb803e8-fc20-4ec6-87e2-7af6f6936e2c)

~~~
bunnycorn
The market is stupid. They have valuated Apple under Amazon, now Apple is over
Amazon and Microsoft.

How stupid is that?

~~~
mythz
Why is it stupid? Apple made 8x more profit than Amazon and 2.4x more profit
than Microsoft.

It deserves to be worth more and still has the lowest P/E ratio of all major
tech companies (5.7x lower than AMZN).

If you think something is undervalued, buy it.

~~~
bunnycorn
It's stupid because the market valuated AAPL at about $150 three months ago,
and now is about $150.

That stupid.

BTW, I say the market is stupid because I bought AAPL shares January 28th (a
monday), and I've bet the market ever since, I've beat SP500, DOW, I've won
AMZN, MSFT, GOOG, everything. I even won Warren Buffet.

And I'm selling now, because the market is also predictable.

I have no words for it, they do as they are told by the news. I do the
contrary, this is a warning sign for me, I might miss 10%-20%, but it doesn't
matter, 30% is good enough and not worth the risk.

~~~
CamelCaseName
So you beat the market for a total of... Two and a half months?

Your arrogance is pretty typical of people investing for the first time. It's
like buying a scratch off and saying, "Only an idiot doesn't know where to
scratch!"

It's your prerogative if you want to believe that the market is
stupid/predictable, or that you can invest better than people with billions of
dollars in resources, but just ask yourself this: Why are you succeeding where
others aren't?

~~~
bunnycorn
> So you beat the market for a total of... Two and a half months?

I've been beating the market for quite some time.

Looks like the market doesn't go your favor. It went mine, so I'm right.

The market is stupid, the proof is that a company's value doesn't change in a
question of months, but stock does.

> It's your prerogative if you want to believe that the market is
> stupid/predictable, or that you can invest better than people with billions
> of dollars in resources, but just ask yourself this: Why are you succeeding
> where others aren't?

Because very few of us are smart, and not me, because I'm small, but the big
ones are controlling many dumb ones that believe the rhetoric they read
anywhere online and for free. Specially the bots.

------
morpheuskafka
Interestingly there hasn't been a huge shaekup in share price for companies
like Qorvo whose parts are only found in the Intel model, not in the Qualcomm
builds.

------
londons_explore
So will 5G make it to September's iPhone?

5 months isn't normally anywhere near enough to integrate a new baseband chip
and still get to market...

~~~
sbierwagen
Given Intel's recent demo of 6 ghz wifi, September's phone will probably have
4g cell but wifi 6 radios.

------
codegeek
I always wonder how much do the lawyers make whenever litigations like this
are on-going. Easily a few millions ?

~~~
ppeetteerr
I suspect the lawyers are on payroll

~~~
meddlepal
Some are for sure, but this kind of stuff often requires specialization which
may not be in house. Also often you want a second opinion from outside legal
counsel.

~~~
saagarjha
I’m sure both Apple and Qualcomm have large legal teams experienced in this
kind of litigation.

~~~
bluGill
I'm sure those teams often ask for outside help. I know the corporate lawyers
I've talked to (mandatory legal training...) have told me about sitting in a
trial watching as the outside lawyers he hired for the case did the actual
arguments in court.

~~~
cgy1
Both sides employ outside counsel. They're large multinational law firms that
charge a high hourly rate (high 3-figures to 4-figures depending on the
seniority of the attorneys).

------
function_seven
Sorry if this is a naive question: Any chance we'll ever know how much Apple
paid Qualcomm? How open are the books of each company? _Can_ a public company
settle a suit without revealing the terms?

~~~
newusertoday
EPS increase of $2 [https://investor.qualcomm.com/static-
files/3cb803e8-fc20-4ec...](https://investor.qualcomm.com/static-
files/3cb803e8-fc20-4ec6-87e2-7af6f6936e2c)

~~~
function_seven
Thanks! That's useful. Although I assume it aggregates the settlement payment
and some other payments associated with the new agreement. (Although, I guess
you could call the whole package the settlement?)

I guess I'm just looking for the amount of money Apple agreed to pay—beyond
the value of services/chips they will receive—in order to settle this lawsuit.
If the accounting can be done that way.

------
smaili
Does this mean the next iPhone iteration will use Qualcomm's modem?

~~~
giovannibajo1
2020 maybe. 2019 models are surely already fixed on the hardware side

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wiggler00m
How is the market pricing this if the quantum has not been disclosed?

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randomacct3847
How much insider trading happened today.

