Qualcomm on Friday slashed earnings guidance for its next quarter, citing confirmation from Apple that the smartphone company plans to withhold royalty payments until the patent dispute between the two comes to a close.
After better-than-expected results last week, Qualcomm warned the spat could negatively impact earnings down the line. But with Apple’s declaration, Qualcomm gave a clearer picture of just what that will mean for its third fiscal quarter.
Qualcomm dropped its prior revenue guidance range of $5.3 billion to $6.1 billion down to a new bracket of $4.8 billion to $5.6 billion. That dragged its GAAP diluted earnings per share range from 67 to 92 cents down to 52 to 62 cents.
“We are updating our financial guidance for the third quarter of fiscal 2017 to exclude royalty revenues from Apple’s contract manufacturers,” Qualcomm wrote in a note to investors. “The contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant. As a result of these actions, we are adjusting our financial guidance to assume that no payment is made, and therefore no revenues are recognized, in the quarter.”
Qualcomm EVP and General Counsel Don Rosenberg blasted Apple’s move as “wrongful” interference in Qualcomm’s agreements with licensees, and the “latest step in Apple’s global attack on Qualcomm.”
“While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts,” Rosenberg commented. “We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.”
The move follow’s Apple’s filing of a $1 billion lawsuit against Qualcomm in January alleging the latter has overcharged the smartphone maker for royalties.
Qualcomm has defended itself against the accusations, arguing Apple is mischaracterizing the pair’s agreements and noting its cellular technology was key to enabling Apple’s success with the iPhone.
