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Qualcomm reaffirms it will continue to supply Apple during its legal dispute



Qualcomm CEO Steve Mollenkopf said today on the company’s call accompanying its first-quarter earnings report that Qualcomm would continue to work with Apple as a supplier despite a major legal battle between the two companies.

“We intend to remain a good supplier to Apple even while this dispute continues,” Mollenkopf said on the call. “Our preference is to resolve customer disputes with negotiation instead of litigation, so it’s regrettable Apple has taken this path.”

In terms of actually continuing working with Apple, Qualcomm executives explained that the deals it has in place are with their contract manufacturers. Qualcomm has signed agreements with those manufacturers, which the company expects to continue to uphold, though Qualcomm president Derek Aberle said the company would have to take a “wait-and-see” approach for the future.

“We would expect and hope that our licensees will continue to comply with their agreements and Apple will not interfere with those contractual agreements in place,” Aberle said on the call. “We obviously can’t control their actions down the road so we’ll have to see how that develops.”

Apple recently filed a $1 billion lawsuit against Qualcomm over the terms for its technology. Qualcomm’s tactics have also been the subject of charges from the FTC. The company is one of the largest chip providers for smartphones — such as the Snapdragon processor — and relies on huge manufacturers like Apple for a major part of their business.

“We don’t believe we have monopoly power in the chip market or any other market, ” Qualcomm executive vice president, general counsel and corporate secretary Don Rosenberg said on the call. “We have never prevented apple or anybody else from buying from competitive chipmakers.”

With that in mind, Aberle said it did not expect the legal battle to have an impact on the second quarter. Following the initial legal disputes, Qualcomm’s stock took a very sharp dive. The company now faces a potentially huge roadblock for its core business, which saw some positive signs in its first-quarter earnings report as shipments of 3G and 4G devices were up 8 percent.

“If you peel apart all the arguments that Apple is making, we believe firmly that they’re all without merit, at the end of the day they want to pay less for the technology that they’re using,” Aberle said. “It’s pretty simple. That’s the motivation, again they wrap a lot of stuff around that, which we think over time we will be able to clearly show is false. But in the end of the day they want to get to a lower payment. We think that’s not appropriate given the value we’ve established.”

Wall Street was looking for Qualcomm to deliver earnings of about $1.18 per share on $6.12 billion in revenue, while the company said it earned $1.19 per share on $5.99 billion in revenue. While the results came out a little mixed, the legal battle between Apple and Qualcomm continues to cast a big shadow over Qualcomm’s future.

“We have a long history of successfully defending our licensing and practices business model, which have been tested around the globe,” Mollenkopf said. We are very excited about the future and many opportunities directly in front of us. I am confident we will address and get through the legal challenges underway as we have done many times in the past.”



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