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Ending Qualcomm dispute could cost Apple $8bn upfront

Credit Suisse analysts Phillip Wang, Kulbinder Garcha, and Syed Talha Saleem have said that in the present disagreement between Apple and Qualcomm, there is merit in the arguments from both sides.

Writing in Barron’s, they said: β€œ[We] believe mutual self-interest will prevail, making it unlikely that this dispute will result in prolonged litigation or court trials.”

The article continued by saying that Apple needed Qualcomm because the company’s devices will continue to use the latter’s innovations, both in the case of screen technology and for SEP (standard essential patents).

It was claimed that Qualcomm will have to resolve the issue. In the first place, with the biggest mobile OEM with total hardware income of around $190 billion, Apple is simply too big to ignore. Secondly, given the fact that Apple stands ready to increase its market share in a smartphone market that is not growing as expected, Qualcomm will be anxious to resolve the disagreement as soon as possible.



Wang, Garcha and Saleem continued: β€œA lack of exposure for Qualcomm means a declining total available market over the next few years. Third, taking this to trial could result in an outcome that affects Qualcomm’s other agreements.”

The trio expressed their conviction that a settlement was indeed possible. They believed that, similar to the agreements between Qualcomm and Nokia in 2008, and between Qualcomm and Samsung in 2009, an amicable agreement that suited both parties was within reach.

The most likely scenario, they went on to say, was a large upfront payment and a significantly reduced royalty rate.

β€œApple could digest a payment given its cash balances and would welcome a minimal hit to its gross margin, while Qualcomm would welcome upfront revenues.”

They expect the agreement to involve an upfront payment of around $8 billion and an ongoing rate in the vicinity of $5.90 per phone as potentially acceptable to both sides.

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Chris

I've been a passionate evangelist for Apple and the Macintosh throughout my working life, my first love was a Quadra 605 working with a small creative agency in the south of Norfolk UK in the mid 1990's, I later progressed to other roles in other Macintosh dominated industries, first as a Senior graphic designer at a small printing company and then a production manager at Guardian Media Group. As the publishing and printing sector wained I moved into Internet Marketing and in 2006 co-founded blurtit.com which grew to become one the top 200 visited sites in the US (according to Quantcast), at its peak receiving over 15 million visits per month. For the last ten years I have worked as an Affiliate and Consultant to many different business and start ups, my key skill set being online marketing, on page monetisation, landing page optimisation and traffic generation, if you would like to hire me or discuss your current project please reach out to me here.

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